Sarasota Corp. owes Ivanhoe Corp. a 10-year, 10% note in the amount of $343,200 plus $34,320 of accrued interest. The note is due today, December 31, 2020. Because Sarasota Corp. is in financial trouble, Ivanhoe Corp. agrees to forgive the accrued interest, $31,200 of the principal, and to extend the maturity date to December 31, 2023. Interest at 10% of revised principal will continue to be due on 12/31 each year. Assume the following present value factors for 3 periods.

		21/4%		23/8%		21/2%		25/8%		23/4%		3%
Single sum		0.93543		0.93201		0.92859		0.92521		0.92184		0.91514
Ordinary annuity of 1		2.86989		2.86295		2.85602		2.84913		2.84226		2.82861

Compute the new effective-interest rate for Sarasota Corp. following restructure. (Hint: Find the interest rate that establishes approximately $377,520 as the present value of the total future cash flows.) Then prepare a schedule of debt reduction and interest expense for the years 2020 through 2023.

Effective-interest rate

%

SCHEDULE OF DEBT REDUCTION AND INTEREST EXPENSE AMORTIZATION
Date		Cash Paid		Interest Expense		Premium Amortized		Carrying Amount of Note
12/31/20		$		$		$		$
12/31/21
12/31/22
12/31/23
12/31/23

Compute the gain or loss for Ivanhoe Corp. and prepare a schedule of receivable reduction and interest revenue for the years 2020 through 2023.

The gain or loss for Ivanhoe Corp.

$

SCHEDULE OF DEBT REDUCTION AND INTEREST EXPENSE AMORTIZATION
Date		Cash Received		Interest Revenue		Change in Carrying Amount		Carrying Amount of Note
12/31/20		$		$		$		$
12/31/21
12/31/22
12/31/23
12/31/23

A. Prepare all the necessary journal entries on the books of Sarasota Corp. for the years 2020, 2021, and 2022.

B. Prepare all the necessary journal entries on the books of Ivanhoe Corp. for the years 2020, 2021, and 2022.