On December 31, 20x0, the American Bank enters into a debt restructuring agreement with Barkley Company, which is now experiencing financial trouble. The banks agrees to restructure a 12%, issued at par, $3,000,000 note receivable by the following modifications:

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

2. Extending the maturity date from Dec. 31, 20x0, to Jan. 1,20x4

3. Reducing interest rate from 12% to 10%

Barkley pays interest at the end of each year. On Jan 1, 20x4, Barkley Co. pays $2,400,000 in cash to Firstar Bank.

a) WIll the fain be recorded by Barkely be equal to the loss recorded by American Bank under the debt restructuring?

b) Cam Barkely Co. record a gain under the term modification mentioned above? Why?

c) Assuming that the interest rate Barkley should use to compute the interest expense in future period in 1.4276% prepare the interest payment schedule of the not for Barkley Co. after the debt restructuring?

d) Prepare the interest payment entry for Barkley Co. on Dec. 31. 20x2

e) What entry should Barkley make on Jan. 1, 20x4?