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On December 31, 2020, Sheffield Bank enters into a debt restructuring agreement with Barkley Company,...

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Accounting

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On December 31, 2020, Sheffield 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 $ 4,400,000 note receivable by the following modifications: 1. 2. Reducing the principal obligation from $4,400,000 to $ 3,520,000. Extending the maturity date from December 31, 2020, to January 1, 2024. Reducing the interest rate from 12% to 10%. 3. Barkley pays interest at the end of each year. On January 1, 2024, Barkley Company pays $ 3,520,000 in cash to Sheffield Bank. Answer the following questions related to Sheffield Bank (creditor). b) (1) Compute the loss that Sheffield Bank will suffer from the debt restructuring (Round answer to O decimal places, e.g. 38,548.) Loss on restructuring of debt (2) Prepare the journal entry to record the loss. (If no entry is required, select "No Entry" for the account titles and enter for the amounts. Credit account titles are automatically indented when amount is entered. Do not indent manually.) Date Account Titles and Explanation Debit Credit December 31, 2020

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