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Zidane Company issues a one-year interest-bearing note in return for inventory purchased from Capello Company....

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Accounting

Zidane Company issues a one-year interest-bearing note in return for inventory purchased from Capello Company. The note has stated rate of 9% and face value of $1,840,000. Interest is paid in every 3 months. After the third interest payment is made, Zidane and Capello agree to settle the note. Zidane gives Capello securities with a fair value of $1,816,000 for the settlement. The carrying value of the securities is equal to their fair value. Remaining total interest expense until maturity was $48,000 on the day of settlement. Ignoring income taxes, what is the effect of this settlement on Zidanes stockholders equity?

Multiple Choice

  • Decrease of $24,000

  • No effect

  • Increase of $10,800

  • Increase of $24,000

  • Increase of $17,400

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