Wildhorse Corp. currently has an issued debenture outstanding with Abbra Bank. The note has a principal of $$2$ million, it was issued at face value, and interest is payable at $7\%.$ The term of the debenture was $10$ years, and it was issued on December $31,2016.$ The current market rate for this debenture is $9\%.$ Wildhorse has been experiencing financial difficulties and has asked Abbra Bank to restructure the note. Both Wildhorse and Abbra Bank prepare financial statements in accordance with IFRS. It is currently December $31,2023.$

For each of the following independent situations related to the above scenario, prepare the journal entries that Wildhorse and Abbra Bank would make for the restructuring that is described.

Abbra Bank agrees to modify the note by allowing Wildhorse not to pay the interest on the note for the remaining period. $($Hint: Refer to Chapter $3$ for tips on calculating and use the time value of money tables.$)$ Assume that the bank had not previously recognized any loss on impairment. $($Round discount factors to $6$ decimals e$.$g$.0\mathrm{.}527500$ and final answers to $0$ decimal places, e$.$g$.5,275.$ Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select $"$No Entry" for the account titles and enter $0$ for the amounts. List all debit entries before credit entries.$)$

Click here to view the factor table PRESENT VALUE OF $1.$

Click here to view the factor table PRESENT VALUE OF AN ANNUITY OF $1.$

On the books of Wildhorse Corporation:

Account Titles and Explanation

Debit

Credit

Notes Payable

Gain on Restructuring of Debt

On the books of Abbra Bank:

Account Titles and Explanation

Debit

Credit