On January 2, 2017 Cretin Co., was indebted to Fourth National Bank under a $12 million, 10% unsecured note. The note was signed January 2, 2015, and was due December 31, 2020. Annual interest was last paid on December 31, 2015. Cretin Co. negotiated a restructuring of the terms of the debt agreement due to financial difficulties.
Required:
Prepare all journal entries for Cretin Co., to record the restructuring and any remaining transactions relating to the debt under each independent assumption.
A. Fourth National Bank agreed to settle the debt in exchange for land which cost Cretin Co. $8,500,000 and has a fair market value of $10,000,000.
B. Fourth National Bank agreed to (1) forgive the accrued interest from last year (2) reduce the remaining four interest payments to $600,000 each, and (3) reduce the principal to $9,000,000.

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The Answer of On January 2, 2017 Cretin Co., was indebted to Fourth National Bank under a $12 million, 10% unsecured note. The note was signed January 2, 2015, and was due December 31, 2020. Annual interest was last paid on December 31, 2015. Cretin Co. negotiated a restructuring of the terms of the debt agreement due to financial difficulties.
Required:
Prepare all journal entries for Cretin Co., to record the restructuring and any remaining transactions relating to the debt under each independent assumption.
A. Fourth National Bank agreed to settle the debt in exchange for land which cost Cretin Co. $8,500,000 and has a fair market value of $10,000,000.
B. Fourth National Bank agreed to (1) forgive the accrued interest from last year (2) reduce the remaining four interest payments to $600,000 each, and (3) reduce the principal to $9,000,000.