Landon Company owes First Bank $400,000
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Case 2
As of January 1st, Landon Company owes First Bank $400,000 which is due on December 31st. Since
Landon Company seems unable to repay the note, the bank agreed that Landon can settle this balance
by agreeing to make four annual installments on each of the next four years, provided that it adds a
“due on demand” clause to the note. Specifically, the lender will “do its best” not to call the note,
provided that no adverse significant shift occurs in business operations. However, First Bank has the
sole discretion to ascertain if adverse conditions arose, and then to call the note due immediately. How
should Landon Company account for this situation
Complete Answer:
