Accounting

Italian Pizza is a restaurant franchisor. To finance its expansion plan, the company borrowed $T million from French Finance on Dec. 31, 2012, to be repaid in 10 years. Annual interest on the loan (6%) would he paid on Dec. 31 of each year. Italian Pizza experienced liquidity issues and asked French Finance to restructure the note on Dec. 31, 201';|r {after interest due on that day was paid). Both Italian Pizza and French Finance follow IFRS. The prevailing interest rate was 4% on Dec. 31, 201?. Preparejournal entries that Italian Pizza and French Finance were required to male: under the following independent assumptions: {a} French Finance agreed to accept a building from Italian Pizza to settle the loan. The building had a buck value of' $560,000 {original cost: $2,100,000] and a fair value of' $6.02 million. French Finance had already recognized a loss on impairment {$840,000}. {h} French Finance agreed to reduce the principal to $4.0 million, and reduced interest to 5% for the following ve years. French Finance had not previously recognized any loss on impairment