MartinezCompany owes $197,000plus $17,400of accrued interest to Sandhill State Bank. The debt is a 10-year,10% note. During 2017, Martinez's business deteriorated due to a faltering regional economy. On December 31, 2017, Sandhill State Bank agrees to accept an old machine and cancel the entire debt. The machine has a cost of $347,000, accumulated depreciation of $190,850, and a fair value of $174,000.

Prepare journal entries for Martinez Company and Sandhill 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.)