Monty Co. owes $217,600 to Flounder Inc. The debt is a 10-year, 11% note. Because Monty Co. is in financial trouble, Flounder Inc. agrees to accept some land and cancel the entire debt. The land has a book value of $96,600 and a fair value of $144,000. (a) Prepare the journal entry on Monty’s books for debt restructure. (b) Prepare the journal entry on Flounder’s books for debt restructure.
Homework Answers
| No. | Account Titles and Explanation | Debit | Credit |
| (a) | Monty Co.s entry | ||
| Notes payable | $ 2,17,600 | ||
| Land | $ 96,600 | ||
| Gain on disposition of land ($144000 - $96600) | $ 47,400 | ||
| Gain on restructuring of land | $ 73,600 | ||
| (b) | Flounder Inc. Entry | ||
| Land | $ 1,44,000 | ||
| Allowance for doubtful accounts | $ 73,600 | ||
| Notes receivable | $ 2,17,600 | ||
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Exercise 14-21 (Part Level Submission) Monty Company owes $225,000 plus $20,200 of accrued interest to Flounder...
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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.
(a)
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Monty Company owes $225,000 plus $20,200 of accrued interest to
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Monty’s business deteriorated due to a faltering regional economy.
On December 31, 2020, Flounder State Bank agrees to accept an old
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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.
(a)
Prepare journal entries for Monty Company and Flounder...
Larkspur Inc. owes Pearl Bank $205,000 plus $19,100 of accrued interest. The debt is a 10-year, 10% note. During 2020, Larkspur's business declined due to a slowing regional economy. On December 31, 2020, the bank agrees to accept an old machine and cancel the entire debt. The machine has a cost of $400.000. accumulated depreciation of $229,000, and a fair value of $185,000. The bank plans to dispose of the machine at a cost of $6,200. Both Larkspur and Pearl...
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