Account Titles and Explanation

Debit

Credit

$($To record this transaction on the books of Marin City Bank $($the creditor$))($To record this transaction on the books of Union Trust $($the debtor$).)$Marin City Bank lent $$20\mathrm{.}70$ million to Union Trust. Union Trust in turn invested this amount in residential apartment buildings, but

because of low occupancy rates it cannot meet its loan obligations. Marin City Bank agrees to accept from Union Trust a building with

a fair value of $$17\mathrm{.}00$ million in full settlement of the $$20\mathrm{.}70-$million loan obligation. The building has a recorded carrying value of

$$22\mathrm{.}30$ million on the books of Union Trust, that is net of accumulated depreciation of $$5\mathrm{.}30$ million. For simplicity, assume that no

prior allowance for doubtful accounts has been set up on the note and no impairment has been recognized on the building.

Prepare the journal entries to record the settlement and asset transfer for both the creditor and debtor. $($List all debit entries before

credit entries. Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select

$"$No Entry" for the account titles and enter O for the amounts.$)$