Ride Mining was formed to explore for and mine lithium deposits in Northern Ontario, in response to an expected surge in demand for the mineral from EV makers. Ride Mining borrowed $12 million from Capital Two Bank on Dec. 31, 2016, to be repaid in 8 years. Annual interest on the loan (7%) would be paid on Dec. 31 of each year. Facing rising costs of mining lithium and declining sales due to the pandemic, Ride Mining asked Capital Two Bank for concessions on the loan on Dec. 31, 2021 (after interest due on that day was paid). Both Ride Mining and Capital Two Bank follow IFRS. A similar loan would carry an interest rate of 5% on Dec. 31, 2021. Prepare journal entries for Ride Mining and Capital Two Bank for debt restructuring for each independent assumption below:

a) Capital Two Bank agreed to reduce the principal to $10 million, and reduce the annual interest rate to 2% for the following three years. The bank had already recognized a loss on impairment ($800,000).

b) Capital Two Bank agreed to accept mining equipment from Ride Mining to settle the loan. The equipment in question had a book value of $5.5 million (original cost: $11 million) and a fair value of $8 million. The bank had not previously recognized any loss on impairment.