Rocky Mountain Corp. currently has an issued debenture outstanding with Abbra Bank. The note has a principal of $2 million, was issued at face value, and interest is payable at 7%. The term of the debenture was 10 years, and was issued on December 31, 2013. The current market rate for this debenture is 9%. Rocky Mountain Corp. has been experiencing financial difficulties and has asked Abbra Bank to restructure the note. Both Rocky Mountain and Abbra Bank prepare financial statements in accordance with IFRS. It is currently December 31, 2020. 

Instructions 

For each of the following independent situations related to the above scenario, prepare the journal entries that Rocky Mountain Corp. and Abbra Bank would make for the restructuring that is described. Use (1) factor tables or (2) Excel function PV to calculate the amounts for the journal entries and round amounts to the nearest dollar. 

a. Abbra Bank has agreed to accept common shares with a market value of $1.5 million in exchange for relinquishing this note. Assume that the bank had previously recognized a loss on impairment. 

b. Abbra Bank has agreed to accept a building in exchange for relinquishing this debenture. The building has a carrying amount of $500,000 (original cost was $1.9 million) and a fair value of $1.5 million. Assume that the bank had already recognized a loss on impairment. 

c. Abbra Bank agrees to modify the note by allowing Rocky Mountain not to pay the interest on the note for the remaining period. Assume that the bank had not previously recognized any loss on impairment. 

d. Abbra Bank agrees to reduce the principal to $1.7 million and require interest only in the third year at 4%, waiving the first two years' worth of interest. Assume that the bank had not previously recognized any loss on impairment.