c.

December 1, 20X1
Notes Payable 40,000
Restructured Notes Payable 40,000

December 1, 20X2
Restructured Notes Payable 19,048
Interest Expense ($40,000  10%) 4,000
Cash 23,048

December 1, 20X3
Restructured Notes Payable 20,953
Interest Expense ($40,000 – 19,048)  10% 2,095
Cash 23,048

DIF: M OBJ: 21-1

a. Accounts Payable.
b. Accounts Payable-Lyon Corporation.
c. Retained Earnings.
d. an appropriate expense account.

3. Following is the balance sheet of Tontoe Corporation on July 1, 20X5, just prior to obtaining the
required stockholder approval to undergo a quasi-reorganization:

Tontoe Corp.
Balance Sheet
July 1, 20X5

Assets

Current Assets:
Cash $ 5,000
Accounts receivable 110,000
Inventory 105,000
$220,000
Property, plant, and equipment:
Land $ 50,000
Plant and equipment $200,000
Less accumulated depreciation (120,000) 80,000 130,000
Total assets $350,000

Liabilities and Stockholders' Equity

Current Liabilities:
Accounts payable $100,000
Long-term Liabilities:
Notes payable 190,000
Common stock ($10 par) $50,000
Paid in excess of par 25,000
Retained earnings (deficit) (15,000) 60,000
Total liabilities and stockholders' equity. $350,000

21-1