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Prepare the required entry on january

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Question - ACME Incorporated has a $3.1 million dollar, 9% loan, annual interest payments, with BMO maturing on December 31, 2025. Due to decrease revenues caused by the pandemic, the company is experiencing solvency and cash flow issues that have negatively impacted the its ability to make its interest and principal payments. ACME's year end is December 31, and the company reports under IFRS.

On January 01, 2021, the bank agreed to reduce the interest rate to 7.5% and extend the maturity date to 2028 (The current market rate is 8%).

Required -

1. Conclude on the appropriate accounting treatment and show calculations to support your conclusion.

2. Prepare the required entry on January 01, 2021 (if any).

3. Prepare the required entry on December 31, 2021 (if any).

Reference no: EM133134215

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