Exercise 14-27

Martinez Corp. owes $296,000 to Sandhill Trust. The debt is a 10-year, 12% note due December 31, 2017. Because Martinez Corp. is in financial trouble, Sandhill Trust agrees to extend the maturity date to December 31, 2019, reduce the principal to $251,000, and reduce the interest rate to 6%, payable annually on December 31.

(b)

Prepare the journal entries on Sandhill Trusts books on December 31, 2017, 2018, 2019.

(Round present value factor calculations to 5 decimal places, e.g. 1.25124 and the final answer to 0 decimal places e.g. 58,971. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts. Credit account titles are automatically indented when amount is entered. Do not indent manually.)