Rocky Mountain Corp. currently has issued debenture outstanding with Abbra Bank. The note has a principal of $2 million, it was issued at face value, and interest is payable at 7%. The term of the debenture was 10 years and it was issued on December 31, 2016. The current market rate for this debenture is 9%.

It is currently December 31, 2023.

D) Abbra Bank agrees to reduce the principal to $1.7 million and require interest only in the third year at 4% waiving the first 2 years' worth of interest. Assume that the bank had not previously recognized any loss on impairment.

For the above scenario, prepare the journal entries that Rocky Corporation and Abbra Bank would make for the restructuring that is described.

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