Cutler Manufacturing manufactures and distributes specialty piping used in the construction industry. Due to the recent contraction in the commercial construction market, the company has had difficulty servicing its outstanding debt. In particular, debt bearing interest at a stated rate of 6% with 42 remaining payments of $15,000 per month is being considered for restructuring. In spite of this difficulty, the company is not deemed to experiencing financial difficulties such that it would qualify for a troubled debt restructuring. The creditor and the company have identified several alternatives as follows:

a. Convey vacant land with a fair market value of $380,000 and a book value of $260,000 to the creditor along with a commitment to make 40 monthly payments of $5,067.60 each.
b. Convey vacant land with a fair market value of $380,000 and a book value of $260,000 to the creditor along with a commitment to make 60 monthly payments of $3,000 each. The new debt has a fair value of $160,000.

For each of the above restructuring alternatives, determine the impact on the company’s income statement for the first two months of the restructuring period.