(Term Modification with Gain-Debtor's Entries) On December 31, 2010, the American Bank enters into a debt restructuring agreement with Barkley Company, which is now experiencing financial trouble. The bank agrees to restructure a 12%, issued at par, $3,000,000 note receivable by the following modifications: Reducing the principal obligation from $3,000,000 to $1,900,000. Extending the maturity date from December 31, 2010, to December 31, 2013. Reducing the interest rate from 12% to 10%. Barkley pays interest at the end of each year. On January 1, 2014, Barkley Company pays $1,900,000 in cash to American Bank for the principal. (a) How much gain can Barkley Company record a under this term modification? $ (b) Prepare the journal entries to record the gain on Barkley's books. Description/Account Debit Credit (c) What interest rate should Barkley use to compute its interest expense in future periods? % (d) Prepare the interest payment schedule of the note for Barkley Company after the debt restructuring. (If answer is zero, please enter 0, do not leave any fields blank.) BARKLEY COMPANY Interest Payment After Debt Restructuring Effective Interest Rate 0% Date Cash Paid (10%) Interest Expense (0%) Reduction of Carrying Amount Carrying Amount of Note 12/31/10 $ 12/31/11 $ $ $ 12/31/12 12/31/13 Total $ $ $ (e) Prepare the interest payment entries for Barkley Company on December 31, of 2011, 2012, and 2013. Description/Account Debit Credit (f) What entry should Barkley make on January 1, 2014