Question $7$ of $7$

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On December $31,2022,$ Sterling Bank enters into a debt restructuring agreement with Novak plc$,$ which is now experiencing financial trouble. The bank agrees to restructure a $12\%,$ issued at par, $4,200,000$ note receivable by the following modifications:

Reducing the principal obligation from $4,200,000$ to $3,360,000.$

Extending the maturity date from December $31,2022,$ to January $1,2026.$

Reducing the interest rate from $12\%$ to $10\%.$ Novak's market rate of interest is $15\%.$

Novak pays interest at the end of each year. On January $1,2026,$ Novak pays $3,360,000$ in cash to Sterling Bank.

Can Novak record a gain under the term modification mentioned above?

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List of Accounts

Prepare the amortization schedule of the note for Novak after the debt modification. $($Round present value factor calculations to $5$ decimal places, e$.$g$.1\mathrm{.}25124$ and the final answer to $0$ decimal places e$.$g$.58,971.)$

NOVAK COMPANY

Prepare the interest payment entry for Novak on December $31,2024.($Round answers to $0$ decimal places, e$.$g$.38,548.$ 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.$)$