Question
Flint Company owes $201,000 plus $17,900 of accrued interest to Buffalo State Bank. The debt is a 10-year, 10% note. During 2020, Flints business deteriorated
Flint Company owes $201,000 plus $17,900 of accrued interest to Buffalo State Bank. The debt is a 10-year, 10% note. During 2020, Flints business deteriorated due to a faltering regional economy. On December 31, 2020, Buffalo 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 Flint Company and Buffalo 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.)
No. | Date | Account Titles and Explanation | Debit | Credit |
---|---|---|---|---|
Flint Company (Debtor): | ||||
1. | December 31, 2020 | enter an account title to record the transaction for Flint Company (Debtor) on December 31, 2020 | enter a debit amount | enter a credit amount |
enter an account title to record the transaction for Flint Company (Debtor) on December 31, 2020 | enter a debit amount | enter a credit amount | ||
enter an account title to record the transaction for Flint Company (Debtor) on December 31, 2020 | enter a debit amount | enter a credit amount | ||
enter an account title to record the transaction for Flint Company (Debtor) on December 31, 2020 | enter a debit amount | enter a credit amount | ||
enter an account title to record the transaction for Flint Company (Debtor) on December 31, 2020 | enter a debit amount | enter a credit amount | ||
enter an account title to record the transaction for Flint Company (Debtor) on December 31, 2020 | enter a debit amount | enter a credit amount | ||
Buffalo State Bank (Creditor): | ||||
2. | December 31, 2020 | enter an account title to record the transaction for Buffalo State Bank (Creditor) on December 31, 2020 | enter a debit amount | enter a credit amount |
enter an account title to record the transaction for Buffalo State Bank (Creditor) on December 31, 2020 | enter a debit amount | enter a credit amount | ||
enter an account title to record the transaction for Buffalo State Bank (Creditor) on December 31, 2020 | enter a debit amount | enter a credit amount | ||
enter an account title to record the transaction for Buffalo State Bank (Creditor) on December 31, 2020 | enter a debit amount | enter a credit amount |
enter an account title to record the transaction for Buffalo State Bank (Creditor) on December 31, 2020 | enter a debit amount | enter a credit amount |
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How should Flint report the following in its 2020 income statement?
1. | Gain or loss on the disposition of machine | select between gain and loss Ordinary GainOrdinary LossOrdinary ExpenseOrdinary Income | ||
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2. | Gain or loss on restructuring of debt | select between gain and loss Ordinary IncomeOrdinary LossOrdinary GainOrdinary Expense |
Assume that, instead of transferring the machine, Flint 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 Buffalo State Bank treats Flints 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.)
No. | Date | Account Titles and Explanation | Debit | Credit |
---|---|---|---|---|
Flint Company (Debtor): | ||||
1. | December 31, 2020 | enter an account title to record the transaction for Flint Company (Debtor) on December 31, 2020 | enter a debit amount | enter a credit amount |
enter an account title to record the transaction for Flint Company (Debtor) on December 31, 2020 | enter a debit amount | enter a credit amount | ||
enter an account title to record the transaction for Flint Company (Debtor) on December 31, 2020 | enter a debit amount | enter a credit amount | ||
enter an account title to record the transaction for Flint Company (Debtor) on December 31, 2020 | enter a debit amount | enter a credit amount | ||
enter an account title to record the transaction for Flint Company (Debtor) on December 31, 2020 | enter a debit amount | enter a credit amount | ||
Buffalo State Bank (Creditor): | ||||
2. | December 31, 2020 | enter an account title to record the transaction for Buffalo State Bank (Creditor) on December 31, 2020 | enter a debit amount | enter a credit amount |
enter an account title to record the transaction for Buffalo State Bank (Creditor) on December 31, 2020 | enter a debit amount | enter a credit amount | ||
enter an account title to record the transaction for Buffalo State Bank (Creditor) on December 31, 2020 | enter a debit amount | enter a credit amount | ||
enter an account title to record the transaction for Buffalo State Bank (Creditor) on December 31, 2020 | enter a debit amount | enter a credit amount |
enter an account title to record the transaction for Buffalo State Bank (Creditor) on December 31, 2020 | enter a debit amount | enter a credit amount |
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