TROUBLED DEBT RESTRUCTURING London Enterprises has been experiencing significant financial problems since it began business three years ago. They currently owe Valley Bank $2,900,000 plus past due interest for one year at 7%. In the hopes of settling the debt London offered Valley a parcel of land that they bought a number of years ago for $2,300,000 and which had a current market value of $1,900,000. London would exchange the parcel of property it acquired in exchange for full settlement of the debt. Situation A - Assuming that Valley was agreeable to this deal how would the transaction be recorded on the books of both the creditor (Valley) and the debtor (London). Situation B - London does not want to give up the piece of prime land and has approached the bank with in hopes of arranging some modification of terms. After a significant amount of bargaining, Valley has agreed to the following Reduction of the interest rate to 5%. Forgiveness of the accrued interest due on the loan. Reduction of the principal to $2,750,000. Interest only for two years with principal and interest to be paid at the end of year 3 Required: Determine the gain or loss for London and Valley assuming the restructuring of terms