At January 1, 2021, Transit Developments owed First City Bank Group $620,000, under an 9% note...

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.)

Solutions

Expert Solution

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)

ekkarill92 answered 2 years ago

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