Question

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 State Bank to record this debt settlement. (If no entry is required select "No Entry" for the account titles and enter for the amounts. Credit account titles are automatically Indented when amount ante . Do not indian masally) Credit Account Titles and Explanation Sarasota Company (Debtor): 1. December 31, 2017 Ivanhoe State Bank (Creditor): 2. December 31, 2017

Answer 1

Answer: 1

No.	Date	Account titles and Explanation	Debit	Credit	Working
	Sarasota company (Debtor)
1	Dec 31, 2017	Note Payable	170,000
		Interest Payable	15,200
		Accumulated Dep. - Mach.	181,500
		Machine		330,000
		Gain on Disposition of Mach		3,500	$152,000 - ($330,000 - $181,500)
		Gain on Debt Restructuring		33,200	($170,000 + $15,200) - $152,000
Ivanhoe State Bank (Creditor)
2	Dec 31, 2017	Machine	152,000
		Allowance for Doubtful A/c	33,200		($170,000 + $15,200) - $152,000
		Notes Receivables		170,000
		Interest Receivables		15,200
Answer: 2
	Sarasota company (Debtor)
1	Dec 31, 2017	Note Payable	170,000
		Interest Payable	15,200
		Common Stock		150,000	(15,000 * $10)
		Additional paid in Capital		2,000
		Gain on Debt Restructuring		33,200	($170,000 + $15,200) - $152,000
	Ivanhoe State Bank (Creditor)
2	Dec 31, 2017	Investment - Trading	152,000
		Allowance for Doubtful A/c	33,200		($170,000 + $15,200) - $152,000
		Notes Receivables		170,000
		Interest Receivables		15,200