Colt Company is indebted to Kent Company under an P8,000,000, 10% 4-year note dated December 31, 2013. The interest of P800,000 was paid on December 31, 2014 and 2015.

During 2016, Colt Company experienced financial difficulties and is likely to default unless concessions are made.

On December 31, 2016, Kent Company agreed to restructure the debt as follows:

a. Interest of P800,000 for 2016, due December 31, 2016 was made payable December 31, 2017.

b. Interest for 2017 was waived.

c. The principal amount was reduced to P7,000,000.

Required:

Prepare journal entry to record the debt restructuring on the books of Colt Company following USA GAAP.