Santa Ltd., who owes Claus Corp. $ 600,000 in notes payable, is in financial difficulty. To eliminate the debt, Claus agrees to accept from Santa land having a fair value of $ 455,000 and a recorded cost of $ 340,000.

Instructions

a) Calculate the amount of gain or loss to Santa on the transfer (disposition) of the land.

b) Calculate the amount of gain or loss to Santa on the settlement of the debt.

c) Prepare the journal entry on Santa's books to record the settlement of the debt.

d) Calculate the gain or loss to Claus from settlement of the receivable from Santa.

e) Prepare the journal entry on Claus's books to record the settlement of the receivable.