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

1.		Reducing the principal obligation from $2,000,000 to $1,600,000.
2.		Extending the maturity date from December 31, 2020, to January 1, 2024.
3.		Reducing the interest rate from 12% to 10%.

Barkley pays interest at the end of each year. On January 1, 2024, Barkley Company pays $1,600,000 in cash to Wildhorse Bank. Answer the following questions related to Wildhorse Bank (creditor)

What interest rate should Wildhorse Bank use to calculate the loss on the debt restructuring?

Interest rate

%

(1) Compute the loss that Wildhorse Bank will suffer from the debt restructuring.

Loss on restructuring of debt

$

(2) Prepare the journal entry to record the loss.

Date	Account Titles and Explanation	Debit	Credit
December 31, 2020

Prepare the interest receipt schedule for Wildhorse Bank after the debt restructuring.

WILDHORSE BANK Interest Receipt Schedule After Debt Restructuring Effective-Interest Rate
Date		Cash Received		Interest Revenue		Increase in Carrying Amount		Carrying Amount of Note
12/31/20		$		$		$		$
12/31/21
12/31/22
12/31/23
Total		$		$		$

Prepare the interest receipt entry for Wildhorse Bank on December 31, 2022.

Date	Account Titles and Explanation	Debit	Credit
December 31, 2022

What entry should Wildhorse Bank make on January 1, 2024?

Date	Account Titles and Explanation	Debit	Credit
December 31, 2024