(Restructure of Note under Different Circumstances) Sandro Corporation is having financial difficulty and therefore has asked Botticelli National Bank to restructure its $3 million note outstanding.

The present note has 3 years remaining and pays a current rate of interest of 10%. The present market rate for a loan of this nature is 12%. The note was issued at its face value.

Instructions Presented below are four independent situations. Prepare the journal entry that Sandro and Botticelli National Bank would make for each of these restructurings.

(a) Botticelli National Bank agrees to take an equity interest in Sandro by accepting common stock valued at $2,200,000 in exchange for relinquishing its claim on this note. The common stock has a par value of $1,000,000.

(b) Botticelli National Bank agrees to accept land in exchange for relinquishing its claim on this note.

The land has a book value of $1,950,000 and a fair value of $2,400,000.

(c) Botticelli National Bank agrees to modify the terms of the note, indicating that Sandro does not have to pay any interest on the note over the 3-year period.

(d) Botticelli National Bank agrees to reduce the principal balance due to $2,500,000 and require interest only in the second and third year at a rate of 10%.