37.

Use the information below for the next two questions:

Company, Inc., which owes Bank Inc., $330,000 in notes payable with unamortized discount balance of #30,000, is in financial difficulty. To eliminate the debt, Bank agrees to accept from Company land having a fair market value of $270,000 and a carrying value of $250,000 on Company's balance sheet.

How much gain should Company, Inc., recognize on the disposition of the land and settlement of the debt, respectively?

(1) $20,000 and $60,000

(2) $30,000 and $50,000

(3) $30,000 and $20,000

(4) $20,000 and $30,000

38. The journal entry on Bank's books to record the settlement of this receivable is:

(1)

Land		270,000
	Allowance for Doubtful Accounts		30,000
	Notes Receivable		300,000

(2)

Land		270,000
	Discount		30,000
	Allowance for Doubtful Accounts		30,000
	Notes Receivable		330,000

(3)

Land		270,000
	Discount		30,000
	Bad Debt Expense		30,000
	Notes Receivable		330,000

(4)

Land		270,000
	Bad Debt Expense		30,000
	Notes Receivable		300,000