Vargo Limited owes $270,000 to First Trust Inc. on a 10-year, 12% note due on December 31,

Question:

Vargo Limited owes $270,000 to First Trust Inc. on a 10-year, 12% note due on December 31, 2014. The note was issued at par. Because Vargo is in financial trouble, First Trust Inc. agrees to extend the date to December 31, 2016, reduce the principal to $220,000, and reduce the interest rate to 5%, payable annually on December 31. The market rate is currently 5%. Both Vargo and First Trust prepare in accordance with IFRS.
Instructions
(a) Prepare the journal entry on Vargo's books on December 31, 2014, 2015, and 2016.
(b) Prepare the journal entry on First Trust's books on December 31, 2014, 2015, and 2016.
Financial Statements
Financial statements are the standardized formats to present the financial information related to a business or an organization for its users. Financial statements contain the historical information as well as current period’s financial... Maturity
Maturity is the date on which the life of a transaction or financial instrument ends, after which it must either be renewed, or it will cease to exist. The term is commonly used for deposits, foreign exchange spot, and forward transactions, interest...