In: Accounting
At January 1, 2021,
Transit Developments owed First City Bank Group $620,000, under an
9% note with three years remaining to maturity. Due to financial
difficulties, Transit was unable to pay the previous year's
interest.
First City Bank Group agreed to settle Transit’s debt in exchange
for land having a fair value of $470,000. Transit purchased the
land in 2017 for $335,000.
Required:
Prepare the journal entry(s) to record the restructuring of the
debt by Transit Developments. (If no entry is required for
a transaction/event, select "No journal entry required" in the
first account field.)
Journal Entries :-
S No. | Particulars | Debit($) | Credit($) |
1) | Land A/c ($470000-$335000) | 135000 | |
Gain on Disposition of Assets A/c | 135000 | ||
(Being Record of Gain on Disposition of Assets) | |||
2) | Notes Payable A/c | 620000 | |
Interest Payable A/c ($620000*9%) | 55800 | ||
Gain on Troubled Debt Restructuring A/c | 205800 | ||
Land A/c | 470000 | ||
(Being Record Restructuring of Debt) |