Answer:
Inanhoe Company |
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Inanhoe Company owes $179,000 plus accrued interest $16,000 to Shamrock State Bank. | |||
The debt is 10 years 10% note | |||
On December 31,2017, Shamrock State Bank agrees to accept old machine and cancel the debt | |||
Cost | Accumulated Depreciation | Fair Value | |
The Machine accepted by Shamrock state Bank | $ 3,48,000 | $ 1,91,400 | $ 1,60,000 |
Inanhoe Company(Debtor) | |||
a) | Journal Entries for settlement of Debt | ||
Date | Particular | Debit($) | Credit($) |
December 31st,2017 | Note Payable | 1,79,000 | |
Interest Payable | 16,000 | ||
Accumulated Depreciation | 1,91,400 | ||
To Machine | 3,48,000 | ||
* | To Gain on disposition of Equipment=(($160,000-($3,48,000-$191,400)) | 3,400 | |
** | To Gain on Restructuring of Debt=($179,000+$16,000-$160,000) | 35,000 | |
(Being Machinery given to Shamrock for settlement of debt) | |||
Shamrock State Bank (Creditor) | |||
Date | Particular | Debit($) | Credit($) |
December 31st,2017 | Machinery | 1,60,000 | |
Allowance for doubtful accounts=($179,000+$16,000-$160,000) | 35,000 | ||
To Notes Receivable | 1,79,000 | ||
To Interest Receivable | 16,000 | ||
(Being Machinery received at fair value for settlement of debt) |
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