Sandhill Corp. owes $256,000 to Teal Trust. The debt is a 10-year, 12% note due December 31, 2017. Because Sandhill Corp. is in financial trouble, Teal Trust agrees to extend the maturity date to December 31, 2019, reduce the principal to $205,000, and reduce the interest rate to 7%, payable annually on December 31.

(a)		Prepare the journal entries on Sandhills books on December 31, 2017, 2018, 2019.
(b)		Prepare the journal entries on Teal Trusts books on December 31, 2017, 2018, 2019.

PART A:

PART B:

(a) Date Account Titles and Explanation Debit Credit Sandhill Corp.'s 2017 Notes Payable 7950 Gain on Restructuring of Debt 7950 2018 Notes Payable 14350 Cash 14350 2019 Notes Payable 14350 Cash 14350 2017 Bad Debt Expense Allowance for Doubtful Accounts 2018 Cash 14350 Allowance for Doubtful Accounts Interest Revenue 2019 Cash 14350 Allowance for Doubtful Accounts Interest Revenue To record Interest Revenue) Cash 205000 Allowance for Doubtful Accounts Notes Receivable