Debt of restructuring

Green Company has an overdue 8% note payable to City Bank at 6,400,000 and recorded accrued interest of 512,000. As a result of a settlement on January 1, 2017, City Bank agreed to the following restructuring arrangement:

a. Reduced the principal obligation to 5,600,000.

b. Forgave the 512,000 accrued interest.

c. Extended the maturity date to December 31, 2018.

d. Annual interest of 10% is to be paid on December 31, 2017 and 2018.

The present value of 1 at 8% for two periods is 0.8573, and the present value of an ordinary annuity of 1 at 8% for two periods is 1.7833.

Required: Prepare the entries for 2017 and 2018 to record the modification of terms and show all the necessary solutions.