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Exercise 14-21 Shamrock Company owes $201,000 plus $17,900 of accrued interest to Bridgeport State Bank. The debt is a 10-year, 10% note. During 2017, Shamrock's
Exercise 14-21 Shamrock Company owes $201,000 plus $17,900 of accrued interest to Bridgeport State Bank. The debt is a 10-year, 10% note. During 2017, Shamrock's business deteriorated due to a faltering regional economy. On December 31, 2017, Bridgeport State Bank agrees to accept an old machine and cancel the entire debt. The machine has a cost of $354,000, accumulated depreciation of $194,700, and a fair value of $179,000. 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 0 for the amounts. Credit account titles are automatically indented when amount is entered. Do not indent manually.) Account Titles and Explanation Shamrock Company (Debtor): No. Date Debit Credit 1. December 31, 2017 Notes Payable 201,000 17,900 194,700 Interest Payable Accumulated Depreciation-Machinery Machinery Gain on Disposal of Machin Gain on Restructuring of Debt Bridgeport State Bank (Creditor) 354,000 inery 2. December 31, 2017 Machinery Allowance for Doubtful Accounts Notes Receivable 201,000 Interest Receivable How should Shamrock report the following in its 2017 income statement? 1. Gain or loss on the disposition of machine Ordin 2. Gain or loss on restructuring of debt ary Gain Ordinary Gain SHOW LIST OF ACCOUNTS LINK TO TEXT Assume that, instead of transferring the machine, Shamrock decides to grant 16,000 shares of its common stock ($10 par) which has a fair value of $179,000 in full settlement of the loan obligation. If Bridgeport State Bank treats Shamrock's stock as a trading investment, prepare the entries to record the transaction for both parties. (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 amount is entered. Do not indent manually.) Account Titles and Explanation Shamrock Company (Debtor): No. Date Debit Credit 1. December 31, 2017 Notes Payable Interest Payable Common Stock Paid-in Capital in Excess of Par - Common Stock Gain on Restructuring of Debt Bridgeport State Bank (Creditor) 2. December 31, 2017 Equity Investments Allowance for Doubtful Accounts Notes Receivable Interest Receivable
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