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On December $31,2023,$ Green Bank enters into a debt restructuring agreement with Troubled Inc., which is now experiencing financial trouble. The bank agrees to restructure a $$2-$million, $12\%$ note receivable issued at par by the following modifications:

Reducing the principal obligation from $$2$ million to $$1\mathrm{.}9$ million

Extending the maturity date from December $31,2023,$ to December $31,2026$

Reducing the interest rate from $12\%$ to $10\%$

Troubled pays interest at the end of each year. On January $1,2027,$ Troubled pays $$1\mathrm{.}9$ million in cash to Green Bank. Troubled prepares financial statements in accordance with IFRS $9.$

Instructions

Using $(1)$ factor tables, $(2)$ a financial calculator, or $(3)$ Excel function PV$,$ determine whether or not Troubled should record a gain. $($Hint: Refer to Chapter $3$ for tips on calculating.$)$

Prepare an entry at December $31,2023,$ based on the results of your calculation.

Prepare an effective interest amortization table for the remaining term of the note. Round to the nearest dollar.

Prepare the interest payment entry for Troubled on December $31,2025,$ and the entry on January $1,2027.$

Assume instead that Troubled follows ASPE. Using $(1)$ a financial calculator or $(2)$ Excel function Rate, calculate the rate of interest that Troubled should use to calculate its interest expense in future periods. $($Hint: Refer to Chapter $3$ for tips on calculating.$)$ Round the interest rate calculated to four decimal places.

Continuing the assumption of following ASPE, prepare an effective interest amortization table for the remaining term of the note. Round to the nearest dollar.

Continuing the assumption of following ASPE, prepare the interest payment entry for Troubled on December $31,2025,$ and the entry on January $1,2027.$

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