On December 31, 2020, American Bank enters into a debt restructuring agreement with Kingbird Company, which is now experiencing financial trouble. The bank agrees to restructure a 12%, issued at par, $2,720,000 note receivable by the following modifications:

1.		Reducing the principal obligation from $2,720,000 to $2,176,000.
2.		Extending the maturity date from December 31, 2020, to January 1, 2024.
3.		Reducing the interest rate from 12% to 10%.

Kingbird pays interest at the end of each year. On January 1, 2024, Kingbird Company pays $2,176,000 in cash to American Bank.

Part 1

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Will the gain recorded by Kingbird be equal to the loss recorded by American Bank under the debt restructuring? NoYes

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Part 2

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Can Kingbird Company record a gain under the term modification mentioned above? NoYes

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Part 3

Assuming that the interest rate Kingbird should use to compute interest expense in future periods is 1.4276%, prepare the interest payment schedule of the note for Kingbird Company after the debt restructuring. (Round answers to 0 decimal places, e.g. 38,548.)

KINGBIRD COMPANY Interest Payment Schedule After Debt Restructuring Effective-Interest Rate
Date		Cash Paid		Interest Expense		Reduction of Carrying Amount		Carrying Amount of Note
12/31/20		$		$		$		$
12/31/21
12/31/22
12/31/23
Total		$		$		$

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Part 4

Prepare the interest payment entry for Kingbird Company on December 31, 2022. (Round answers to 0 decimal places, e.g. 38,548. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts. Credit account titles are automatically indented when amount is entered. Do not indent manually.)

Date	Account Titles and Explanation	Debit	Credit
December 31, 2022

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Part 5

What entry should Kingbird make on January 1, 2024? (Round answers to 0 decimal places, e.g. 38,548. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts. Credit account titles are automatically indented when amount is entered. Do not indent manually.)

Date	Account Titles and Explanation	Debit	Credit
December 31, 2024