$($Term Modification$$Debtor$$s Entries$)$ On December $31,2023,$ Green Bank

enters into a debt restructuring agreement with Troubled Inc., which is now experiencing financial

trouble. The bank agrees to restructure a $$2-$million, $12\%$ note receivable issued at par by the following

modifications:

$1.$ Reducing the principal obligation from $$2$ million to $$1\mathrm{.}9$ million

$2.$ Extending the maturity date from December $31,2023,$ to December $31,2026$

$3.$ Reducing the interest rate from $12\%$ to $10\%$

Troubled pays interest at the end of each year. On January $1,2027,$ Troubled pays $$1\mathrm{.}9$ million in

cash to Green Bank. Troubled prepares financial statements in accordance with IFRS $9.$

Assume the same information as in

E$14\mathrm{.}24$ and answer the following questions related to Green Bank $($the creditor$).$ Green Bank prepares

financial statements in accordance with IFRS $9.$ There is no evidence of a significant increase in credit

risk and $12-$month expected credited losses are calculated at zero. For simplicity, assume that Green

Bank had not recognized any impairment prior to this $($although it likely would have done so under the

expected loss model$).$

Instructions

a$.$ What interest rate should Green Bank use to calculate the loss on the debt restructuring?

b$.$ Using $(1)$ factor tables, $(2)$ a financial calculator, or $(3)$ Excel function PV$,$ calculate the loss that

Green Bank will accrue based on the debt restructuring