On December 31, 2025. American Bank enters into a debt restructuring agreement with Ayayai Company, which is now experiencing financial trouble. The bank agrees to restructure a 12%, issued at par, $2,930,000 note receivable by the following modifications:
1. Reducing the principal obligation from $2,930,000 to $2.344,000.
2. Extending the maturity date from December 31, 2025, to January 1, 2029.
3.
Reducing the interest rate from 12% to 10%.
Ayayai pays interest at the end of each year. On January 1, 2029, Ayayai Company pays $2.344,000 in cash to American Bank.
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Will the gain recorded by Ayayai be equal to the loss recorded by American Bank under the debt restructuring? Can Ayayai Company record a gain under the term modification mentioned above? Assuming that the interest rate Ayayai should use to compute interest expense in future periods is 1.4276%, prepare the interest payment schedule of the note for Ayayai Company after the debt restructuring. (Round answers to 0 decimal places, e.g. 38,548.) Prepare the interest payment entry for Ayayai Company on December 31, 2027. (Round answers to 0 decimal places, eg. 38,548. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts. Credit account titles are automatically indented when the amount is entered. Do not indent manually. List all debit entries before credit entries.) What entry should Ayayai make on January 1, 2029? (Round answers to 0 decimal places, eg. 38,548. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts. Credit account titles are automatically indented when the amount is entered. Do not indent manually. List debit entry before credit entry.)