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Discuss the nature of this transaction

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Question - On December 31, 2017, Federal Bank enters into a debt restructuring agreement with Carson Company which is experiencing financial difficulties. The bank restructures a $6,000,000 note receivable by:

1. Reducing the principal obligation from $6,000,000 to $5,000,000.

2. Extending the maturity date from 12/31/17 to 12/31/20, and

3. Reducing the interest rate from 12% to 6%.

Interest has been paid up to date as of 12/31/17.

Discuss the nature of this transaction, indicating whether any gain or loss is recognized by either party and preparing any 12/31/17 journal entries that may be required by the debtor (Carson).

Reference no: EM132571019

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