On December $31,2025,$ American Bank enters into a debt restructuring agreement with Flounder Company, which is now experiencing financial trouble. The bank agrees to restructure a $12\backslash \%,$ issued at par, $\backslash (\backslash$$ $3,500,000\backslash )$ note receivable by the following modifications:

$1.$ Reducing the principal obligation from $\backslash (\backslash$$ $3,500,000\backslash )$ to $\backslash (\backslash$$ $2,360,000\backslash ).$

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

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

Flounder pays interest at the end of each year. On January $1,2029,$ Flounder Company pays $\backslash$$$2,360,000$ in cash to American Bank.

$($a$)$

Can Flounder Company record a gain under this term modification?

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

The gain for Flounder Company $\backslash$$

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Assistance Used

List of Accounts $($b$)$

Prepare the journal entries to record the gain on Flounder'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.$)$

List of Accounts

Attempts: $0$ of $5$ used

$($c$)$

What interest rate should Flounder use to compute its interest expense in future periods? $($Do not leave any answer field blank. Enter $0$ for amounts.$)$

Interest rate

$\backslash \%$

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List of Accounts

Prepare the interest payment schedule of the note for Flounder Company after the debt restructuring.

List of Accounts $($e$)$

Prepare the interest payment entries for Flounder 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 $0$ 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

Crec

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List of Accounts $($f$)$

What entry should Flounder make on January $1,2029?($If no entry is required, select $"$No Entry" for the account titles and enter $\backslash (\backslash$mathbf$\{0\}\backslash )$ for the amounts. Credit account titles are automatically indented when the amount is entered. Do not indent manually. List debit entry before credit entry.$)$

List of Accounts