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, $$2,900,000$ note receivable by the following modifications:

Reducing the principal obligation from $$2,900,000$ to $$2,320,000.$

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 $$2,320,000$ in cash to American Bank. Answer the following questions related to American Bank $($creditor$).$

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$$ Your answer is correct.

What interest rate should American Bank use to calculate the loss on the debt restructuring?

Interest rate

$\%$ also cumpute the loss that american bank will suffer from the debt restructure and prepare the joirnal entry to record the loss. Then prepare the intetest receipt schedule for american bank after the debt restructure. Also prepare interest receipt entry for the american bank on december $31,2027$ and the entry they should make on january $1,2029$