Problem B

Guido Properties owes First State Bank $60 million under a 7% note with two years remaining to maturity. Due to financial difficulties of Guido, the previous years interest ($4.2 million) was not received. The bank agrees to settle the note receivable and accrued interest receivable in exchange for land having a fair value of $44 million and a book value of $ 32 million.

Required:

Prepare all the journal entries required for the settlement on Guidos books.