a) Since the debt modification is <u>substantial</u>, more than 10%, the gain to be recorded by Barkley Company, $600,000, will be equal to the loss recorded by American Bank under the debt restructuring.
b) Barkley Company can record a Profit under the term modification above because it is a <u>substantial</u> debt modification, with a gain of $600,000, which is 20% of the original debt.
c. The preparation of the Interest Payment Schedule is as follows:
Period PV PMT Interest FV
1 $2,400,000.00 $621,565.76 $34,262.40 $1,812,696.64
2 $1,812,696.64 $621,565.76 $25,878.06 $1,217,008.93
3 $1,217,008.93 $621,565.76 $17,374.02 $612,817.19
4 $612,817.19 $621,565.76 $8,748.58 $0.00
<h3>What is a debt modification?</h3>
A debt modification is the restructuring of debt to enable the debtor experiencing financial difficulties to regain the financial muscle to settle the restructured debt.
Debt modification can affect the following debt terms:
- The amounts
- Timing of interest payments
- Timing of principal repayment
- Rate of interest.
<h3>Data and Calculations:</h3>
12% Note Payable = $3,000,000
Revised 10% Note Payable = $2,400,000
Gain on Debt Modification = $600,00
Extended Maturity Period = 4 years
Learn more about debt modifications at brainly.com/question/1490221
