On December $31,2025,$ American Bank enters into a debt restructuring agreement with Bonita Company, which is now experiencing financial trouble. The bank agrees to restructure a$12\%,$ issued at par, $$4,100,000$note receivable by the following modifications:

$1.$ Reducing the principal obligation from $$4,100,000$to $$2,780,000$

$2.$ Extending the maturity date from December $31,2025,$ to January $1,2029.$

$3.$ Reducing the interest rate from$12\%$ to$10\%$

Bonita$$pays interest at the end of each year. On January $1,2029,$ Bonita Company pays $$2,780,000$in cash to American Bank.

ANSWER THE FOLLOWING

a$.$ Can Bonita Company record a gain under this term modification? If yes, compute the gain for Bonita Company. If no$,$ enter the amount as $0.$

b$.$ Prepare the journal entries to record the gain on Bonita$$s books December $31,2025.$

c$.$ Prepare the interest payment schedule of the note for Bonita Company after the debt restructuring. $12/31/24-12/31/28$

d$.$ Prepare the interest payment entries for Bonita Company on December $31,$ of $2026,2027,$ and $2028$

e$.$ What entry should Bonita make on January $1,2029?$