Vargo Limited owes $270,000 to First Trust Inc. on a 10-year, 12% note due on December 31, 2020. The note was issued at par. Because Vargo is in financial trouble, First Trust Inc. agrees to extend the maturity date to December 31, 2022, reduce the principal to $220,000, and reduce the interest rate to 5%, payable annually on December 31. The market rate is currently 5%. Vargo prepares financial statements in accordance with IFRS. 

Instructions 

Using (1) factor tables, (2) a financial calculator, or (3) Excel function PV, prepare the journal entries on Vargo's books on December 31, 2020, 2021, and 2022.