SECTION IV $-$ DEBT RENEGOTIATION

Use the information given below to answer Questions $30-32.$

Dronz Delivery Services, Inc., $($DDS$)$ runs a well$-$established delivery service that is used by several large mail$-$order companies and grocery stores. Following an initial rapid growth after startup, the firm$$s business eventually slowed down as a result of a similar decline in the businesses of its partners. During the expansion stage, the company had acquired some high$-$tech delivery equipment to support its expanded business operations. The acquisition had been funded by the Lachine Commercial Bank $($The Bank$).$ The Bank had issued a $10-$year $10\%$ note at par for $$4,320,000.$

In addition, the company further owed the Bank $$432,000$ for past interest. Since the loan was coming due on January $1,2020,$ DDS approached the Bank for concessions to settle its debt.

The two parties finally arrived at an agreement on the terms for a final settlement. On January $1,2020,$ DDS would pay a cash amount of $$630,000$ and accept a $4\%6-$year note for $$4,200,000$ agreed to in a final settlement plan. Interest on the revised note is payable annually on December $31.$ The market rate on January $1,2020,$ was $6\%.$ Both parties have adopted ASPE.

Question $30$:

For this question, assume that the renegotiated terms resulted in a settlement. DDS and BANK will record the new note in their respective books of accounts with amounts as follows $[$DDS: $; BANK: $$]$

a$.$ DDS: $$4,200,000$; BANK: $$4,320,000$

b$.$ DDS: $$4,200,000$; BANK: $$4,830,000$

c$.$ DDS: $$3,786,942$; BANK: $$3,102,458$

d$.$ DDS: $$3,102,458$; BANK: $$3,786,942$

e$.$ None of the above answers.