(Answered) Question - on december 31 2003 the merchant bank enters

Accounting

Question - On December 31, 2003, the merchant bank enters into a debt restructuring agreement with Shrek Company, which is now experiencing financial trouble. The bank agrees to restructure a 10% issued at par, $1,000,000 note receivable by the following modifications:

1. Reducing the principal obligation to $800,000

2. Extending the maturity date to 12/31/05

3. Reducing the interest rate to 6%

Prepare all journal entries from 12-31-03 to 12-31-05 for both parties (debtor and creditor), and explain the interest rate assumed by the debtor and creditor after the restructuring. Show all work.

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