Seaview Company owes $175,000 plus $15,200 of accrued interest to Indigo State Bank. The debt is a
Question:
Seaview Company owes $175,000 plus $15,200 of accrued interest to Indigo State Bank. The debt is a 10-year, 10% note. During 2020, Seaview?s business deteriorated due to a faltering regional economy. On December 31, 2020, NewCity State Bank agrees to accept an old machine and cancel the entire debt. The machine has a cost of $329,000, accumulated depreciation of $180,950, and a fair value of $152,000.
Part 1: Prepare journal entries for Seaview Company and NewCity State Bank to record this debt settlement.?
How should Seaview report the following in its 2020 income statement?
1. | Gain or loss on the disposition of machine | select between gain and loss ?Ordinary ExpenseOrdinary GainOrdinary IncomeOrdinary Loss | ||
---|---|---|---|---|
2. | Gain or loss on restructuring of debt | select between gain and loss ?Ordinary LossOrdinary IncomeOrdinary ExpenseOrdinary Gain |
Part 2: Assume that, instead of transferring the machine, Seaview decides to grant 15,000 shares of its common stock ($10 par) which has a fair value of $152,000 in full settlement of the loan obligation. If NewCity State Bank treats Seaview's stock as a trading investment, prepare the entries to record the transaction for both parties.?
Financial Accounting
ISBN: 978-0078025549
3rd edition
Authors: J. David Spiceland, Wayne Thomas, Don Herrmann