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Bonita Industries is indebted to Carla Vista under a $1040000, 13%, three-year note dated December 31,...

Bonita Industries is indebted to Carla Vista under a $1040000, 13%, three-year note dated December 31, 2016. Because of Bonita's financial difficulties developing in 2018, Bonita owed accrued interest of $135200 on the note at December 31, 2018. Under a troubled debt restructuring, on December 31, 2018, Carla Vista agreed to settle the note and accrued interest for a tract of land having a fair value of $920000. Bonita's acquisition cost of the land is $718000. Ignoring income taxes, on its 2018 income statement Bonita should report as a result of the troubled debt restructuring

Gain on Disposal Restructuring Gain

$457200

$0

$322000

$0

$202000

$120000

$202000

$255200
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Answer #1

OPTION: $202000, $255200

EXPLANATION:

Gain on disposal = fair value of land - cost of acquisition of land

= $920000 - $718000

= $202000

Restructuring gain = loan + interest accrued - fair value of land

= $1040000 + $135200 - $920000

= $255200

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