Splash Corp. owes Sun Corp. a $106,600, 10-year, 10% note issued at par plus $10,660 of accrued interest. The note is due today, December 31, 2020. Because Splash Corp. is in financial trouble, Sun Corp. agrees to forgive the accrued interest and $9,060 of the principal, and to extend the maturity date to December 31, 2023. Interest at 10% of the revised principal will continue to be due on December 31 of each year. Assume the market rate of interest is 10% at the date of refinancing.

1.Prepare a schedule of the debt reduction and interest expense for the years 2020 through 2023.

2.Calculate the gain or loss for Sun Corp. and prepare a schedule of the receivable reduction and interest income for the years 2020 through 2023

3.Prepare all the necessary journal entries on the books of Splash Brothers Corp. for the years 2020, 2021, and 2022.