Headland Company owes $190,000 plus $16,700 of accrued interest to Sage State Bank. The debt is a 10-year, 10% note. During 2017, Headland's business deteriorated due to a faltering regional economy. On December 31, 2017, Sage State Bank agrees to accept an old machine and cancel the entire debt. The machine has a cost of $325,000, accumulated depreciation of $178,750, and a fair value of $167,000. Prepare journal entries for Headland Company and Sage State Bank to record this debt settlement. (If no entry is required, select "No Entry" for the account titles and enter O 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 Headland Company (Debtor): 1. December 31, 2017 Sage State Bank (Creditor): 2. December 31, 2017 How should Headland report the following in its 2017 income statement? 1. Gain or loss on the disposition of machine 2. Gain or loss on restructuring of debt Ordinary Loss Ordinary Gain Assume that, instead of transferring the machine, Headland decides to grant 16,000 shares of its common stock ($10 par) which has a fair value of $167.000 in full settlement of the loan obligation. If Sage State Bank treats Headland'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 O 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 Headland Company (Debtor): 1. December 31, 2017 Sage State Bank (Creditor): 2. December 31, 2017