Corona Industries purchased a stamping machine on January 2, 2018, for $100,000. It made an initial payment of $20,000 and financed the balance over 5 years at State Bank. The loan terms were for annual payments of $16,000 plus 10% interest, payable on December 31 each year. The year 2021 proves to be a difficult year and on December 1, 2021 Corona negotiates a debt restructuring with State Bank. The settlement calls for cash payment of accrued interest plus $4,000 on December 1 and the transfer of 200 acres of land held by Corona that cost $15,000. The land has a current fair value of $22,000.

Which one of the following entries will Corona make to adjust for the land just prior to transfer?

Multiple Choice

DR Loss on disposal of asset $7,000 CR Land $7,000

DR Land $7,000 CR Gain on disposal of asset $7,000

DR Note payableState Bank $7,000 CR Gain on disposal of asset $7,000

DR Land $7,000 CR Note payableState Bank $7,000