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 (a) Prepare the journal entries on Martinez's books on December 31, 2017, 2018, 2019 (b) Prepare the journal entries on Sandhill Trust's books on December 31, 2017, 2018, 2019