Problem 3 (25 marks) Simmons Ltd. borrowed $7 million from DT bank on Dec. 31, 2015, to be repaid in 10 years. Annual interest on the loan (4%) would be paid on Dec. 31 of each year. Facing fierce competition, Simmons experienced a dramatic drop in revenues 5 years later and asked DT Bank to restructure the note on Dec. 31, 2020 (after interest due on that day was paid). Both Simmons and DT Bank follow IFRS. The interest rate on a new loan similar to Simmons' would carry an interest rate of 6% on Dec. 31, 2020. For each independent assumption below, prepare the journal entries that Simmons and DT would make for the restructuring described above. (1) Sensing that Simmons is in serious trouble, DT agreed to reduce the principal to $5 million, and reduced interest to 3% for the following five years. The bank had not previously recognized any loss on impairment. (2) DT Bank agreed to accept a used business jet from Simmons to settle the loan. The plane had a book value of $1.1 million (original cost: $9 million) and a fair value of $3.8 million. The bank had already recognized a loss on impairment ($400,000). 4 Problem 3 (25 marks) Simmons Ltd. borrowed $7 million from DT bank on Dec. 31, 2015, to be repaid in 10 years. Annual interest on the loan (4%) would be paid on Dec. 31 of each year. Facing fierce competition, Simmons experienced a dramatic drop in revenues 5 years later and asked DT Bank to restructure the note on Dec. 31, 2020 (after interest due on that day was paid). Both Simmons and DT Bank follow IFRS. The interest rate on a new loan similar to Simmons' would carry an interest rate of 6% on Dec. 31, 2020. For each independent assumption below, prepare the journal entries that Simmons and DT would make for the restructuring described above. (1) Sensing that Simmons is in serious trouble, DT agreed to reduce the principal to $5 million, and reduced interest to 3% for the following five years. The bank had not previously recognized any loss on impairment. (2) DT Bank agreed to accept a used business jet from Simmons to settle the loan. The plane had a book value of $1.1 million (original cost: $9 million) and a fair value of $3.8 million. The bank had already recognized a loss on impairment ($400,000). 4