Question: Question 2: Debt financing (15 marks) Mann, Inc., which owes Doran Co. $900,000 in notes payable with accrued interest of $72,000, is in financial difficulty.

Question 2: Debt financing (15 marks) Mann, Inc., which owes Doran

Question 2: Debt financing (15 marks) Mann, Inc., which owes Doran Co. $900,000 in notes payable with accrued interest of $72,000, is in financial difficulty. To settle the debt, Doran agrees to accept from Mann equipment with a fair value of $780,000, an original cost of $1,050,000, and accumulated depreciation of $250,000. Required: (a) Compute the gain or loss to Mann on the settlement of the debt. Show calculations. (4 marks) (b) Compute the gain or loss to Mann on the transfer of the equipment. Show calculations. (4 marks) (c) Prepare the journal entry on Mann's books to record the settlement of this debt. (7 marks)

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