At January 1, 2018, Rothschild Chair Company, Inc., was indebted to First Lincoln Bank under a $20 million,10% unsecured note. The note was signed January 1, 2015, and was due December 31, 2021. Annual interest waslast paid on December 31, 2016. Rothschild Chair Company was experiencing severe financial difficulties andnegotiated a restructuring of the terms of the debt agreement.Required:Prepare all journal entries by Rothschild Chair Company, Inc., to record the restructuring and any remainingtransactions relating to the debt under each of the independent circumstances below:1. First Lincoln Bank agreed to settle the debt in exchange for land having a fair value of $16 million but carriedon Rothschild Chair Company’s books at $13 million.2. First Lincoln Bank agreed to (a) forgive the interest accrued from last year, (b) reduce the remaining fourinterest payments to $1 million each, and (c) reduce the principal to $15 million.3. First Lincoln Bank agreed to defer all payments (including accrued interest) until the maturity date and accept$27,775,000 at that time in settlement of the debt

Question

At January 1, 2018, Rothschild Chair Company, Inc., was indebted to First Lincoln Bank under a $20 million,
10% unsecured note. The note was signed January 1, 2015, and was due December 31, 2021. Annual interest was
last paid on December 31, 2016. Rothschild Chair Company was experiencing severe financial difficulties and
negotiated a restructuring of the terms of the debt agreement.
Required:
Prepare all journal entries by Rothschild Chair Company, Inc., to record the restructuring and any remaining
transactions relating to the debt under each of the independent circumstances below:
1. First Lincoln Bank agreed to settle the debt in exchange for land having a fair value of $16 million but carried
on Rothschild Chair Company’s books at $13 million.
2. First Lincoln Bank agreed to (a) forgive the interest accrued from last year, (b) reduce the remaining four
interest payments to $1 million each, and (c) reduce the principal to $15 million.
3. First Lincoln Bank agreed to defer all payments (including accrued interest) until the maturity date and accept
$27,775,000 at that time in settlement of the debt

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