Use the same information as in E14.24 but assume now that Green Bank reduced the principal to $1.6 million rather than $1.9 million. On January 1, 2024, Troubled Inc. pays $1.6 million in cash to Green Bank for the principal. The market rate is currently 10%.

Instructions

a. Using (1) factor tables, (2) a financial calculator, or (3) Excel function PV, determine if Troubled can record a gain under this term modification. If yes, calculate the gain. (Hint: Refer to Chapter 3 for tips on calculating.) Round to the nearest dollar.

b. Prepare the journal entry to record the gain (if any) on Troubled's books.

c. What interest rate should Troubled use to calculate its interest expense in future periods? Will your answer be the same as in E14.24? Why or why not?

d. Prepare the amortization schedule of the note for Troubled after the debt restructuring.

e. Prepare the interest payment entries for Troubled on December 31, 2021, 2022, and 2023.

f. What entry should Troubled make on January 1, 2024?