Question: Mann, Inc., which owes Doran Co. $1,000,000 in notes payable with accrued interest of $90,000, is in financial difficulty. To settle the debt, Doran agrees

Mann, Inc., which owes Doran Co. $1,000,000 in notes payable with accrued interest of $90,000, is in financial difficulty. To settle the debt, Doran agrees to accept from Mann equipment with a fair value of $950,000, an original cost of $1,400,000, and accumulated depreciation of $325,000.

Instructions

(a) Compute the gain or loss to Mann on the settlement of the debt.

(b) Compute the gain or loss to Mann on the transfer of the equipment.

(c) Prepare the journal entry on Manns books to record the settlement of this debt.

(d) Prepare the journal entry on Dorans books to record the settlement of the receivable.

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