On January 1, 2019, a company borrowed $277,510, with payment of $100,000 to be made at the end of each of the next three years, starting December 31, 2019. At December 31, 2019, the company has made one payment but is experiencing financial difficulties and renegotiates the terms of the loan. The creditor grants a concession by changing the annual payments to $95,722 per year for the remaining two years of the loan.
Required a. What is the interest rate on the original loan?
b. What is the carrying value of the loan at December 31, 2019?
c. Will the company report a gain on restructuring due to the change in interest rate on the loan? Explain.
d. What is the new effective interest rate on the loan?
e. Prepare the journal entry to record the $95,722 payment on December 31, 2020 and December 31, 2021.

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The Answer of On January 1, 2019, a company borrowed $277,510, with payment of $100,000 to be made at the end of each of the next three years, starting December 31, 2019. At December 31, 2019, the company has made one payment but is experiencing financial difficulties and renegotiates the terms of the loan. The creditor grants a concession by changing the annual payments to $95,722 per year for the remaining two years of the loan.
Required a. What is the interest rate on the original loan?
b. What is the carrying value of the loan at December 31, 2019?
c. Will the company report a gain on restructuring due to the change in interest rate on the loan? Explain.
d. What is the new effective interest rate on the loan?
e. Prepare the journal entry to record the $95,722 payment on December 31, 2020 and December 31, 2021.

On January 1, 2019, a Company Borrowed $277,510, with Payment