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On December 3 1 , 2 0 1 9 , Jermaine Co . has agreed with Laura Bank to restructure its $ 2 , 0

On December 31,2019, Jermaine Co. has agreed with Laura Bank to restructure its $2,000,000,5-year, 12% note payable. The note was issued on January 1,2018 when the interest rate was 12%. The interest payments are made once a year on December 31.
(a) Laura Bank has agreed to reduce the principal obligation by 15% and the maturity date remained on December 31,2022.
is this a settlement of debt or a non-substantial term modification? Show Calculations
Prepare necessary journal entries on the following dates. Dec 312019 & Dec 312020
(b) Assume instead that Laura Bank has agreed to cancel all interest payments and only collect $2,662,000 on December 31,2022.
is this a settlement of debt or a non-substantial term modification? Show Calculations
Prepare necessary journal entries on the following dates. Dec 312019 & Dec 312020

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