Martinez Company owes $$198,000$ plus $$17,500$ of accrued interest to Sandhill State Bank. The debt is a $10-$year,$10\%$ note. During

$2022,$ Martinez's business deteriorated due to a faltering regional economy. On December $31,2022,$ Sandhill State Bank agrees to

accept an old machine and cancel the entire debt. The machine has a cost of $$384,000,$ accumulated depreciation of $$211,200,$ and a

fair value of $$175,000.$

Assume that, instead of transferring the machine, Martinez decides to grant $17,000$ of its ordinary shares $($ $$10$ par$),$ which have a

fair value of $$175,000,$ in full settlement of the loan obligation. Prepare the entries to record the transaction. $($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

Martinez Company$($Debtor$)$:

December

$31,2022$

Machinery

Allowance for Doubtful Accounts