On December $31,2025,$ American Bank enters into a debt restructuring agreement with Culver Company, which is now experiencing financial trouble. The bank agrees to restructure a $\backslash (12\backslash \%\backslash ),$ issued at par, $\backslash (\backslash$$ $4,400,000\backslash )$ note receivable by the following modifications:

$1.$ Reducing the principal obligation from $\backslash (\backslash$$ $4,400,000\backslash )$ to $\backslash (\backslash$$ $2,990,000\backslash ).$

$2.$ Extending the maturity date from December $31,2025,$ to January $1,2029.$

$3.$ Reducing the interest rate from $\backslash (12\backslash \%\backslash )$ to $\backslash (10\backslash \%\backslash ).$

Culver pays interest at the end of each year. On January $1,2029,$ Culver Company pays $\backslash$$$2,990,000$ in cash to American Bank.

Can Culver Company record a gain under this term modification?

If yes, compute the gain for Culver Company. If no$,$ enter amount as $0.$

The gain for Culver Company $\backslash$$ $($b$)$

Prepare the journal entries to record the gain on Culver's books. $($If no entry is required, select $"$No Entry" for the account titles and enter $0$ for the amounts. Credit account titles are automatically indented when the amount is entered. Do not indent manually. List debit entry before credit entry.$)$

eTextbook and Media

List of Accounts

Attempts: $0$ of $5$ used

$($c$)$

What interest rate should Culver use to compute its interest expense in future periods? $($Do not leave any answer field blank. Enter O for amounts.$)$

Interest rate $($d$)$

Prepare the interest payment schedule of the note for Culver Company after the debt restructuring. $($e$)$

Prepare the interest payment entries for Culver Company on December $31,$ of $2026,2027,$ and $2028.($Record entries in the order displayed in the problem statement. 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.$)$

Date

Account Titles and Explanation

Debit

Credit

What entry should Culver make on January $1,2029?($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.$)$

Debit

Credit