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Requirement A-1: Prepare the following journal entry in the books of debtor for the settlement of debt
Date | Account Title and Explanation | Debit | Credit |
Dec 31 | Notes Payable | $225,000 | |
2020 | Interest Payable | $20,200 | |
Accumulated Depreciation - Machinery | $174,350 | ||
Machinery | $317,000 | ||
Gain on Sale of Machinery | $59,350 | ||
Gain on Restructuring of Debt | $43,200 | ||
To record settlement of debt |
Note Compute gain sale of machinery as follows
Particulars | Amount | Amount |
Fair Value of Machinery | $202,000 | |
Deduct: Cost of Machinery | $317,000 | |
Less: Accumulated Depreciation - Machinery | ($174,350) | $142,650 |
Gain on Sale of Machinery | $59,350 |
Compute gain on restructuring of debt as follows
Particulars | Amount |
Notes Payable | $225,000 |
Add: Interest Payable | $20,200 |
Deduct: Fair Value of Machinery | ($202,000) |
Gain on Restructuring of Debt | $43,200 |
Requirement A-2: Prepare the following journal entry in the books of creditor for the settlement of notes receivable
Date | Account Title and Explanation | Debit | Credit |
Dec 31 | Machinery | $202,000 | |
2020 | Allowance for Doubtful Accounts | $43,200 | |
Notes Receivable | $225,000 | ||
Interest Receivable | $20,200 | ||
To record settlement of notes receivable |
Notes: Compute allowance for doubtful accounts as follows
Particulars | Amount |
Notes Receivable | $225,000 |
Add: Interest Receivable | $20,200 |
Deduct: Fair Value of Machinery Received | ($202,000) |
Allowance for Doubtful Accounts | $43,200 |
Exercise 14-21 (Part Level Submission) Monty Company owes $225,000 plus $20,200 of accrued interest to Flounder...
Exercise 14-21 (Part Level Submission)
Monty Company owes $225,000 plus $20,200 of accrued interest to
Flounder State Bank. The debt is a 10-year, 10% note. During 2020,
Monty’s business deteriorated due to a faltering regional economy.
On December 31, 2020, Flounder State Bank agrees to accept an old
machine and cancel the entire debt. The machine has a cost of
$317,000, accumulated depreciation of $174,350, and a fair value of
$202,000.
(c)
Assume that, instead of transferring the machine, Monty...
Exercise 14-21 Metlock Company owes $221,000 plus $20,100 of accrued interest to Bonita State Bank. The debt is a 10-year, 10% note. During 2020, Metlock's business deteriorated due to a faltering regional economy. On December 31, 2020, Bonita State Bank agrees to accept an old machine and cancel the entire debt. The machine has a cost of $402,000, accumulated depreciation of $221,100, and a fair value of $ 201,000. Prepare journal entries for Metlock Company and Bonita State Bank to...
Shamrock Company owes $221,000 plus $20,100 of accrued interest to Bridgeport State Bank. The debt is a 10-year, 10% note. During 2020, Shamrock's business deteriorated due to a faltering regional economy. On December 31, 2020, Bridgeport State Bank agrees to accept an old machine and cancel the entire debt. The machine has a cost of $402,000, accumulated depreciation of $221,100, and a fair value of $201.000. Your Answer Correct Answer Prepare journal entries for Shamrock Company and Bridgeport State Bank...
Exercise 14-21 Ivanhoe Company owes $179,000 plus $16,000 of accrued interest to Shamrock State Bank. The debt is a 10-year 0% no e Du ng a ra hoes business deter rated due to a faltering regional economy. On December 31, 2017, Shamrock State Bank agrees to accept an old machine and cancel the entire debt. The machine has a cost of $348,000, accumulated depreciation of $191,400, and a fair value of $160,000. Prepare journal entries for Ivanhoe Company and Shamrock...
Exercise 14-21 Shamrock Company owes $201,000 plus $17,900 of accrued interest to Bridgeport State Bank. The debt is a 10-year, 10% note. During 2017, Shamrock's business deteriorated due to a faltering regional economy. On December 31, 2017, Bridgeport State Bank agrees to accept an old machine and cancel the entire debt. The machine has a cost of $354,000, accumulated depreciation of $194,700, and a fair value of $179,000. Prepare journal entries for Shamrock Company and Bridgeport State Bank to record...
entries for December 31,2020
Shamrock Company owes $221,000 plus $20,100 of accrued interest to Bridgeport State Bank. The debt is a 10-year, 10% note. During 2020, Shamrock's business deteriorated due to a faltering regional economy. On December 31, 2020, Bridgeport State Bank agrees to accept an old machine and cancel the entire debt. The machine has a cost of $402,000, accumulated depreciation of $221.100, and a fair value of $201,000. Assume that, instead of transferring the machine, Shamrock decides to...
CALCULATCH FULL SON RINTEE VEEL BACK Sarasota Company owes $170,000 plus $15,200 of accrued interest to Ivanhoe State Bank. The debt is a 10-year, 10% note. During 2017, Sarasota's business deteriorated due to a faltering regional economy. On December 31, 2017, Ivanhoe State Bank agrees to accept an old machine and cancel the entire debt. The machine has a cost of $330,000, accumulated depreciation of $181,500, and a fair value of $152,000. Prepare journal entries for Sarasota Company and Ivanhoe...
Cullumber Company owes $210,000 plus $18,700 of accrued interest to Riverbed State Bank. The debt is a 10-year, 10% note. During 2017, Cullumber's business deteriorated due to a faltering regional economy. On December 31, 2017, Riverbed State Bank agrees to accept an old machine and cancel the entire debt. The machine has a cost of $398,000, accumulated depreciation of $218,900, and a fair value of $187,000. Prepare journal entries for Cullumber Company and Riverbed State Bank to record this debt...
Sunland Company owes $208,000 plus $18,700 of accrued interest to Coronado State Bank. The debt is a 10- year, 10% note. During 2017, Sunland's business deteriorated due to a faltering regional economy. On December 31, 2017. Coronado State Bank agrees to accept an old machine and cancel the entire debt. The machine has a cost of $405,000, accumulated depreciation of $222,750, and a fair value of $187,000. Prepare journal entries for Sunland Company and Coronado State Bank to record this...
Exercise 14-21
Seaview Company owes $175,000 plus $15,200 of accrued interest
to Indigo State Bank. The debt is a 10-year, 10% note. During 2020,
Seaview’s business deteriorated due to a faltering regional
economy. On December 31, 2020, NewCity State Bank agrees to accept
an old machine and cancel the entire debt. The machine has a cost
of $329,000, accumulated depreciation of $180,950, and a fair value
of $152,000.
Part 1: Prepare journal entries for Seaview Company and NewCity
State Bank...