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Rothschild Chair Company, Inc., was indebted to First Lincoln Bank under a $35 million, 10% unsecured note. The note was signed January 1, 2011, and was due December 31, 2024. Annual interest was last paid on December 31, 2019. At January 1, 2021, Rothschild Chair Company was experiencing severe financial difficulties and negotiated a restructuring of the terms of the debt agreement. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) (Use appropriate factor(s) from the tables provided.)

Required:
Prepare all journal entries by First Lincoln Bank to record the restructuring and any remaining transactions, for current and future years, relating to the debt under each of the independent circumstances below:

1. First Lincoln Bank agreed to settle the debt in exchange for land having a fair value of $31 million but carried on Rothschild Chair Company’s books at $28 million.
2. First Lincoln Bank agreed to (a) forgive the interest accrued from last year, (b) reduce the remaining four interest payments to $2.0 million each, and (c) reduce the principal to $30 million.

Future Value of $1 TABLE 1 FV $1 (1i 6.0% 2.5% 3.0% 3.5% 5.5% n/i 1.0% 1.5% 2.0% 4.0% 4.5% 5.0% 7.0% 8.0% 9.0% 10.0% 11.0% 12Present Value of $1 TABLE 2 PV$1 (1+i n/i 1.0% 1.5% 2.5% 10.0% 11.0% 2.0% 3.0% 3.5% 4.0% 4.5% 5.0% 5.5% 6.0% 7.0% 8.0% 9.0% 1Future Value of an Ordinary Annuity of $1 TABLE 3 (1 -1 i FVA = 10.0 % 8.0% 1.0% 2.0% 2.5% 3.0% 3.5% 4.0% 5.0% 5.5% 6.0% 7.0%Present Value of an Ordinary Annuity of $1 TABLE 4 1 - (1i PVA= 3.0% n/i 1.0% 2.0% 2.5% 3.5% 5.0% 5.5% 6.0% 7.0% 8.0% 10.0% 1Future Value of an Annuity Due of $1 TABLE 5 FVAD1+-1x (1i) 5.0% 7.0% 1.0% 1.5% 2.0% 2.5% 3.0% 3.5% 4.0% 4.5% 5.5% 6.0% 8.0%Present Value of an Annuity Due of $1 TABLE 6 1 - (1 (1i PVAD = 7.0% 3.0% 5.0% 8.0% 11.0% 1.0% 1.5% 2.0% 2.5% 3.5% 4.0% 4.5%Required 1 Required 2 First Lincoln Bank agreed to settle the debt in exchange for land having a fair value of $31 million buRequired 2 Required 1 First Lincoln Bank agreed to (a) forgive the interest accrued from last year, (b) reduce the remainingFirst Lincoln Bank agreed to (a) forgive the interest accrued from last year, (b) reduce the remaining four interest paymentsFirst Lincoln Bank agreed to (a) forgive the interest accrued from last year, (b) reduce the remaining four interest paymentsFirst Lincoln Bank agreed to (a) forgive the interest accrued from last year, (b) reduce the remaining four interest paymentsFirst Lincoln Bank agreed to (a) forgive the interest accrued from last year, (b) reduce the remaining four interest paymentsFirst Lincoln Bank agreed to (a) forgive the interest accrued from last year, (b) reduce the remaining four interest payments

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Answer #1
Required 1 First Lincoln Bank agreed to settle the debt in exchange for land having
a fair value of $31 million but carried on Rothschild Chair Company’s books at $28 million.
Details Debit($) Credit($)
Land              30,00,000
Gain on Disposal of Assets          30,00,000
( to record gain on disposal of assets)==( $ 31 Mio - $ 28 Mio)
( fair Value - $ 31 Mio vs Book Value - $ 28 Mio )
First Lincoln Bank Under $ 35 Mio , 10% Unsercured Nite
Notes Payable          3,50,00,000
Interest payable ( 10% *$ 35000000)              35,00,000
Land      3,10,00,000
( as mentioned above $ 31 Mio)
Gain on Trouble Debt Restructuring ( Balancing Number )          75,00,000
( to record restrcuture of Debt)
2 a) Notes payable ( As per Question )              20,00,000
Interest payable ( as above)              35,00,000
Gain on Debt Restructuring            55,00,000
( To record restructuring of the debt)
Every Dec we need to pay Note payable
Notes payable ( As per Question )              20,00,000
Cash          20,00,000
( To record restructuring of the debt to revised Interest rate)
Notes payable          3,00,00,000
Cash      3,00,00,000
( To record restructuring of the debt to revised Principal rate)
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