Question

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.

Answer 1

Answer
Journal entry
1)	Books of Strickland Company
Date	Account Titles and Explanations	Debit	Credit
31-12-2020	Note Payable	$       2,21,000
	Interest Payable	$          20,100
	To Common Stock		$         1,40,000
	To Additional paid in Capital		$            61,000
	To Gain on Debt Restructuring ($221,000+$20,100-$201,000)		$            40,100
2)	Books of Bridgport State Bank
Date	Account Titles and Explanations	Debit	Credit
31-12-2020	Investment - Trading	$       2,01,000
	Allowance for Doubtful A/c  ($221,000+$20,100-$201,000)	$          40,100
	To Notes Receivables		$         2,21,000
	To Interest Receivables		$            20,100