On December 31, 2020, Green Bank enters into a debt restructuring agreement withLarkspurInc., which is now experiencing financial trouble. The bank agrees to restructure a $2-million,12% note receivable issued at par by the following modifications:

1. Reducing the principal obligation from $2million to $1.60million
2. Extending the maturity date from December 31, 2020, to December 31, 2023
3. Reducing the interest rate from12% to10%

Larkspurpays interest at the end of each year. On January 1, 2024,LarkspurInc. pays $1.60million in cash to Green Bank for the principal. The market rate is currently10%.

A.

1. Using (1) factor tables, (2) a financial calculator, or (3) Excel function PV, determine ifLarkspurcan record a gain under this term modification.

(Yes or No) ______?

2. Calculate the gain if any. (For calculation purposes, use 5 decimal places as displayed in the factor table provided and Round final answer to 0 decimal places, e.g. 1,525.) ____?

B. Prepare the journal entries to record the gain (if any) onLarkspur's books.(Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.)

C. What interest rate shouldLarkspuruse to calculate its interest expense in future periods?

Rate of interest applied (10% or 12%) ______?

D. Prepare the amortization schedule of the note forLarkspurafter the debt restructuring.

LARKSPUR INC. INTEREST PAYMENT SCHEDULE AFTER DEBT RESTRUCTURING EFFECTIVE INTEREST RATE Reduction of Carrying Cash Effective Carrying Amount Date Interest Interest Amount of Note 12/31/20 $ 12/31/21 $ $ $ 12/31/22 12/31/23 Total $ $