Ch. 14, Q. 1

Martinez Company owes $166,000 plus $14,600 of accrued interest to Sandhill State Bank. The debt is a 10-year, 10% note. During 2020, Martinez's business deteriorated due to a faltering regional economy. On December 21, 2020, Sandhill State Bank agrees to accept an old machine and cancel the entire debt. The machine has a cost of $221,000, accumulated depreciation of $176,550, and a fair value of $146,000. Prepare journal entries for Martinez Company and Sandhill State Bank to record this debt settlement. if no contry is required, clart No Entry for the accounts and conter for the amounts Credit count tits are outomatically indented when amount is entered. Do not indent manually No. Date Debit Credit Account Titles and Explanation Martinez Company (Debtor): 1 December 31, 2020 Sandhill State Bank (Creditor): 2 December 31, 2020 How should Martinez report the following in its 2020 income statement? 1 Gain or loss on the disposition of machine 2 Gain or loss on restructuring of debt e Textbook and Media List of Accounts Assume that instead of transferring the machine, Martinez decides to grant 14,000 shares of its common stock ($10 par) which has a fair value of $146,000 in full settlement of the loan obligation. If Sandhill State Bank treats Martinez's stock as a trading investment, prepare the entries to record the transaction for both parties. If no cry is required. sedact No Entry for the account tits and enter for the amounts Credit accountilare automatically indeed when amount is ante. Do not indkant manually) No. Date Debit Credit Account Titles and Explanation Martinez Company (Debtor): 1 December 31, 2020 Sandhill State Bank (Creditor): 2 December 31, 2020