On December 31, 2019, Third Bank enters into a debt restructuring agreement with Queseyo Company which is experiencing financial difficulties. The bank restructures a $3,000,000 note receivable by:

1. Reducing the principal obligation from $3,000,000 to $2,400,000.

2. Extending the maturity date from 12/31/19 to 12/31/22, and

3. Reducing the interest rate from 12% to 6%.

Interest has been paid up to date as of 12/31/19.

Instructions

Discuss the nature of this transaction, indicating whether any gain or loss is recognized by either party and preparing any 12/31/19 journal entries that may be required by the debtor (Queseyo).