Question about Financial Asset

Company B purchased a 4-year debt instrument at its fair value of $85,000 by cash and incurred transaction costs of $7,356 on 2 Jan 2013.

The principal amount of debt instrument was $1,000,000, and the instrument carried fixed interest of 5% that would be paid annually in advance starting from 2 Jan 2013. The effective interest rate as estimated was 10%.

The debt instrument is classified as financial asset measured at amortized cost.

The journal entries are like this?

2 Jan 2013 Dr. Financial Asset $857,356
Cr. Cash $857,356
Dr. Bank $50,000
Cr. Financial Asset $50,000

31 Dec 2013 Dr. Interest receivable $80,736
Cr. Interest income $80,736

1 Jan 2014 Dr. Bank $50,000
Dr. Financial Asset $33,810
Cr. Interest receivable $83,810

31 Dec 2014 Dr. Interest receivable $83,810
Cr. Interest income $83,810

1 Jan 2015 Dr. Bank $50,000
Dr. Financial Asset $37,190
Cr. Interest receivable $87,190

31 Dec 2015 Dr. Interest receivable $87,190
Cr. Interest income $87,190

1 Jan 2016 Dr. Bank $50,000
Dr. Financial Asset $40,909
Cr. Interest receivable $90,909

31 Dec 2016 Dr. Interest receivable $90,909
Cr. Interest income $90,909

If at the end of the year 2013, the financial market turned down suddenly, the issuer of the debt instrument declared that it would repay only 50% outstanding interest and 70% of the outstanding principal.

Is it means that the principal amount of debt instrument becomes $1,000,000 x 70% = $700,000 and the redemption value becomes 700,000 too?
The fixed interest of 5% becomes 5% x 50% = 2.5%?

Then becomes like this
Year Opening Balance Interest Receipt (2.5%) Effective interest(10%) Closing
31 Dec 2013 857,356 700,000×2.5%=17,500 83,986 $923,842

And continue ..? Like that?

However, The redemption value cannot cover the figures to make the closing balance of the final years becomes 0. Is that correct?

Also, the principal amount of debt instrument becomes $1,000,000 x 70% = $700,000 then the redemption value becomes 700,000. Is there any credit loss occur? Do I need to make entries about credit loss?

Please give me direction on how to deal with the question. Thank you