Exercise $7-36($Algo$)$ Troubled debt restructuring $[$Appendix $7$B$]$

At January $1,2024,$ Clayton Holsts incorporated owed Third BancCorp $$13$ million, under a $10\%$ note due December $31,2025.$ Interest was paid last on December $31,2022.$ Clayton was experiencing severe financlal difficultles and asked Third BancCorp to modify the terms of the debt agreement. After negotlation Third BancCorp agreed to do the following:

Note: Use appropriate factor$($s$)$ from the tables provided. $($FV of $$1.$ PV of $$1.$ FVA of $$1.$ PVA of $$1.$ FVAD of $$1$ and PVAD of $$1)$

Forgive the interest accrued for the year just ended.

Reduce the remaining two years' interest payments to $$1$ million each.

Reduce the principal amount to $$12$ million.

Requlred:

$1-3.$ Prepare the journal entries by Third BancCorp necessitated by the restructuring of the debt at January $1,2024,$ December $31,2024$ and December $31,2025.$

Note: Enter your answers In whole dollars. If no entry Is required for a transactlon$/$event$,$ select $"$No journal entry requlred" In the first account fleld. Round your final answers to nearest whole dollar amount.

View transaction list

View journal entry worksheet

$\backslash$table$[[,$No$,$Date,General Journal,Debit,Credit$],[h,1,$January $01,2024,$Bad debt expense,,$],[,,$Interest receivable,,$1,300,000$