Shamrock Company | |||||
Shamrock Company owes $201000 plus accrued interest $17900 to Bridgeport State Bank. | |||||
The debt is 10 years 10% note | |||||
On December 31,2017, Bridgeport State Bank agrees to accept old machine and cancel the debt | |||||
Cost | Accumulated Depreciation | Fair Value | |||
The Machine accepted by Bridgeport state Bank | $ 3,54,000.00 | $ 1,94,700.00 | $ 1,79,000.00 | ||
Shamrock Company(Debtor) | |||||
a) | Journal Entries for settlement of Debt | ||||
Date | Particular | Debit | Credit | ||
December 31st,2017 | Note Payable(Given) | $ 2,01,000.00 | |||
Interest Payable(given) | $ 17,900.00 | ||||
Accumulated Depreciation(Given) | $ 1,94,700.00 | ||||
To Machine(Given) | $ 3,54,000.00 | ||||
* | To Gain on disposition of Equipment=(($179000-($354000-$194700)) | $ 19,700.00 | |||
** | To Gain on Restructuring of Debt=($201000+$17900-$179000) | $ 39,900.00 | |||
(Being Machinery given to Bridgeport for settlement of debt) | |||||
Gain on disposition of Equipment | |||||
* | Fair Value | $ 1,79,000.00 | |||
Less: WDV=(Cost-Depreciation)=($354000-$194700) | $ 1,59,300.00 | ||||
Gain on disposition of Equipment | $ 19,700.00 | ||||
** | Gain on Restructuring of Debt: It is the difference between fair value of payment made to legally Restructuring of debt. | ||||
Note Payable | $ 2,01,000.00 | ||||
Interest | $ 17,900.00 | ||||
Total Debt | $ 2,18,900.00 | ||||
Less:Fair Value of Machine | $ 1,79,000.00 | ||||
Gain on Restructuring of Debt | $ 39,900.00 | ||||
Bridgeport State Bank (Creditor) | |||||
Date | Particular | Debit | Credit | ||
Machinery | $ 1,79,000.00 | ||||
Allowance for doubtful accounts=($201000+$17900-$179000) | $ 39,900.00 | ||||
To Notes Receivable | $ 2,01,000.00 | ||||
To Interest Receivable | $ 17,900.00 | ||||
(Being Machinery received at fair value for settlement of debt) | |||||
b) | Under Income Statement both Gain on disposition of Equipment and Gain on Restructuring of debt reported under other income and expenses | ||||
c ) | Issue of Shares against of Debt | ||||
Journal Entries | |||||
Shamrock Company(Debtor) | |||||
Date | Particular | Debit | Credit | ||
Notes Payable | $ 2,01,000.00 | ||||
Interest Payable | $ 17,900.00 | ||||
To Common Stock(16000 shares @$10) | $ 1,60,000.00 | ||||
To Share Premium(Fair Value-Common Stock par value)=($179000-$160000) | $ 19,000.00 | ||||
To Gain on Restructuring of Debt=($201000+$17900-$160000-$19000) | $ 39,900.00 | ||||
(Being issue of 16000 shares @$10 par value for $179000 against of settlement of debt) | |||||
Bridgeport State Bank (Creditor) | |||||
Date | Particular | Debit | Credit | ||
31st Dec 2017 | Equity Investment | $ 1,79,000.00 | |||
Allowance for doubtful accounts | $ 39,900.00 | ||||
To Note Receivable | $ 2,01,000.00 | ||||
To Interest Receivable | $ 17,900.00 | ||||
(Being received $16000 Shares at $179000 for settlement of debt) | |||||
Exercise 14-21 Shamrock Company owes $201,000 plus $17,900 of accrued interest to Bridgeport State Bank. The...
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...
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...
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...
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Exercise 14-21 Larkspur Company owes $222,000 plus $20,600 of accrued interest to Cullumber State Bank. The debt is a 10-year, 10% note. During 2017, Larkspur's business deteriorated due to a faltering regional economy. On December 31, 2017, Cullumber State Bank agrees to accept an old machine and cancel the entire debt. The machine has a cost of $344,000, accumulated depreciation of $189,200, and a fair value of $206,000. Prepare journal entries for Larkspur Company and Cullumber State Bank to record...
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