Question

Shamrock Company owes $221,000 plus $20,100 of accrued interest to Bridgeport State Bank. The debt is a 10-year, 10% note. During 2020, Shamrock's business deteriorated due to a faltering regional economy. On December 31, 2020, Bridgeport State Bank agrees to accept an old machine and cancel the entire debt. The machine has a cost of $402,000, accumulated depreciation of $221,100, and a fair value of $201.000. Your Answer Correct Answer Prepare journal entries for Shamrock Company and Bridgeport State Bank to record this debt settlement. (If no entry is required, select "No Entry" for the account titles and enter for the amounts. Credit account titles are automatically indented when amount is entered. Do not indent manually.) No. Date Account Titles and Explanation Debit Credit Shamrock Company (Debtor): December 31, 2020 1.

Answer 1

Answer:

Shamrock Company
Shamrock Company owes $221,000plus accrued interest $20,100to Bridgeport State Bank.
The debt is 10 years 10% note
On December 31,2020, Bridgeport State Bank agrees to accept old machine and cancel the debt
	Cost	Accumulated Depreciation	Fair Value
The Machine accepted by Shamrock state Bank	$ 402,000	$ 221,100	$  201,000

Shamrock Company(Debtor)
a)	Journal Entries for settlement of Debt
Date	Particular	Debit($)	Credit($)
December 31st,2020	Note Payable	221,000
	Interest Payable	20,100
	Accumulated Depreciation	221,100
	To Machine		402,000
*	To Gain on disposition of Equipment=(($201,000-($402,000-$221,100))		20,100
**	To Gain on Restructuring of Debt=($221,000+$20,100-$201,000)		40,100
	(Being Machinery given to Bridgeport bankfor settlement of debt)
Bridgeport State Bank (Creditor)
Date	Particular	Debit($)	Credit($)
December 31st,2020	Machinery	201,000
	Allowance for doubtful accounts=($221,000+$20,100-$201,000)	40,100
	To Notes Receivable		221,000
	To Interest Receivable		20,100
	(Being Machinery received at fair value for settlement of debt)