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On December 31, 2017, Lloyds Bank enters into a debt restructuring agreement with Central Company, which is now experiencing financial trouble. The bank agrees to

On December 31, 2017, Lloyds Bank enters into a debt restructuring agreement with Central Company, which is now experiencing financial trouble. The bank agrees to restructure a 12%, issued at par, 3,000,000 note receivable by the following modifications: 1. Reducing the principal obligation from 3,000,000 to 2,800,000. 2. Extending the maturity date from December 31, 2017, to January 1, 2022 (4 years). 3. Reducing the interest rate from 12% to 9%. Centrals market rate of interest is 15%. Central pays interest at the end of each year. On January 1, 2022, Central Company pays 2,800,000 in cash to Lloyds Bank. Fair value of the new Note (at December 31, 2017) = 2,320,364 Prepare the journal entries that Central Company should make in: 1. December 31, 2017 for the modification of terms. 2. December 31, 2020 for the Interest payment by Central Company (for year 3 only). 3. January 1, 2022 at the maturity of debt.

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