The Chicago Bears owed the bank of Ketchum, Cheetin, and Wynn $1,800,000 which they had borrowed on January 1, 2017, at an interest rate of 10%. The interest on the loan is payable annually each December 31. The note had an original maturity date of December 31, 2021. Due to excessive player salaries and fan giveaways (not to mention playoff lossescan you say double-doink), it has become increasingly difficult for the team to make the annual interest payments. Although they have made the required interest payments through December 31, 2020, future planning shows that it will not be possible in the future. Therefore, on January 1, 2021, the team and the bank have reached an agreement regarding the restructuring of the note as follows:

Restructured terms:

Principal balance $ 1,550,000

Interest rate 8%

Maturity date December 31, 2025

Using the excel template introduced in Chapter 14, complete the following (Be sure to print off your spreadsheets and highlight on the printout the amounts used for the required items below).

REQUIRED: (27 points)

1. Prepare the journal entries which would be made by the bank as of January 1, 2021, and December 31, 2021, 2022, and 2023. If no entries are required on such dates explain why.

2. Prepare the journal entries which would be made by the Bears as of January 1, 2021, and at December 31, 2021, 2022, and 2023. If no entries are required on such dates then explain why.

3. If the principal balance on the note had been revised to 1,225,000 (all other terms of the restructuring remain the same as above), what is the new effective interest rate that will be used by the debtor when recording all future payments. __________________________

4. Assuming the principal balance on the note had been revised to 1,225,000 prepare the journal entry the Bears would make to record their payment on December 31. 2021.