On December 31, 2020, American Bank enters into a debt restructuring agreement with Sage Company, which is now experiencing financial trouble. The bank agrees to restructure a 12%, issued at par, $2,800,000 note receivable by the following modifications:

1.		Reducing the principal obligation from $2,800,000 to $1,860,000.
2.		Extending the maturity date from December 31, 2020, to January 1, 2024.
3.		Reducing the interest rate from 12% to 10%.

Sage pays interest at the end of each year. On January 1, 2024, Sage Company pays $1,860,000 in cash to American Bank.

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

The gain for Sage Company

$

Prepare the journal entries to record the gain on Sages books. (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.)

Account Titles and Explanation	Debit	Credit

What interest rate should Sage use to compute its interest expense in future periods? (Round answer to 0 decimal places, e.g. 18%.)

The gain

%

Prepare the interest payment schedule of the note for Sage Company after the debt restructuring.

SAGE 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		$		$		$

Prepare the interest payment entries for Sage Company on December 31, of 2021, 2022, and 2023. (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, 2021
December 31, 2022
December 31, 2023

What entry should Sage make on January 1, 2024? (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
January 1, 2024