Accounting for a Troubled Debt Restructuring

Essay

Accounting for a troubled debt restructuring
On December 31, 2020, Riverside Inc. is in financial difficulty and cannot pay a $ 350,000 note (with $ 35,000 accrued interest payable) to Stockton Corp. Stockton agrees to forgive the accrued interest, extend the maturity date to December 31, 2022, and reduce the interest rate to 4%. The present value of the restructured cash flows is $ 299,500.
Instructions
Prepare entries for the following:
a) the restructure on Riverside's books
b) the payment of interest on December 31, 2021
c) the restructure on Stockton's books.