8

Pharoah Co. owes $198,200 to Novak Inc. The debt is a 10 -year, 11% note. Because Pharoah Co. is in financial trouble, Novak Inc agrees to accept some land and cancel the entire debt. The property has a book value of $98,000 and a fair value of $141,200. a. Prepare the journal entry on Pharoah's books for debt restructure. b. Prepare the journal entry on Novak's books for debt restructure. (If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts. Credit account titles are automatically indented when the amount is entered. Do not indent manually. List all debit entries before credit entries.)