On January 1, 2014, Fabco borrowed $5,000,000 from First Bank of Newburg. The loan had a term of five years with the principal amount due at the end of the fifth year. Interest is at an annual rate of 6% with interest being paid semiannually on June 30 and December 31. In connection with the loan, the borrower incurred $84,438 of debt issuance costs that are to be amortized over the term of the loan. The effective interest method is to be used to account for the loan.

Fabco was able to make the first two semiannual debt service payments, but then began to see a serious deterioration in its business. Fabco is currently in default on a number of debts and is unable to secure additional capital at market rates of interest. Based on projected cash flows, it is doubtful that the company will continue as a going concern. The company accrued the interest due on June 30, 2015, but is unable to make the interest payment. In an attempt to resolve these serious issues, Fabco received concessions from First Bank of Newburg and its $5 million debt has been restructured effective June 30, 2015, as follows: the maturity date of the loan was extended for five years beyond June 30, 2015; the June 30, 2015, interest payment was forgiven; and the stated interest rate was increased to 6.6%. However, Fabco paid the bank an additional debt issuance fee of $50,000 on June 30, 2015, as part of the restructuring. This fee is to be expensed.

Required

Prepare all of the necessary entries to account for the above debt from inception through December 31, 2015.