On December $31,2025,$ American Bank enters into a debt restructuring agreement with Martinez Company, which is now

experiencing financial trouble. The bank agrees to restructure a $12\%,$ issued at par, $$3,540,000$ note receivable by the following

modifications:

Reducing the principal obligation from $$3,540,000$ to $$2,832,000.$

Extending the maturity date from December $31,2025,$ to January $1,2029.$

Reducing the interest rate from $12\%$ to $10\%.$

Martinez pays interest at the end of each year. On January $1,2029,$ Martinez Company pays $$2,832,000$ in cash to American Bank.

If no entry is required, select $"$No Entry" for the account titles and enter O for the amounts. Credit account titles are automatically indented

when the amount is entered. Do not indent manually. List all debit entries before credit entries.$)$

$1$:Assuming that the interest rate Martinez should use to compute interest expense in future periods is $1\mathrm{.}4276\%,$ prepare the

interest payment schedule of the note for Martinez Company after the debt restructuring. $($Round answers to $0$ decimal places, e$.$g$.$

$38,548.)$

$1\mathrm{.}1$Prepare the interest payment entry for Martinez Company on December $31,2027.($Round answers to $0$ decimal places, e$.$g$.38,548.$

$1\mathrm{.}2$ What entry should Martinez make on January $1,2029?($Round answers to O decimal places, e$.$g$.38,548.$ If no entry is required, select

$"$No Entry" for the account titles and enter O for the amounts. Credit account titles are automatically indented when the amount is entered.

Do not indent manually. List debit entry before credit entry.$)$

December

$31,2029$