Show Attempt History Current Attempt in Progress Larkspur Inc. owes Pearl Bank $205,000 plus $19,100 of accrued interest. The debt is a 10-year 10% note. During 2020, Larkspur's business declined due to a slowing regional economy. On December 31, 2020, the bank agrees to accept an old machine and cancel the entire debt. The machine has a cost of $400.000, accumulated depreciation of $229,000, and a fair value of $185,000. The bank plans to dispose of the machine at a cost of $6,200. Both Larkspur and Pearl Bank prepare financial statements in accordance with IFRS 9. Your answer is correct. Prepare the journal entries for Larkspur Inc. and Pearl Bank to record this debt settlement. Assume Pearl had previously recognized an allowance for doubtful accounts for the impairment prior to the settlement. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter for the amounts.) Debit Credit Date Account Titles and Explanation Larkspur Inc. Dec. 31, 2020 Notes Payable 205000 19100 Interest Payable 229000 Accumulated Depreciation - Machinery 400000 Machinery 1400 Your answer is partially correct. Assume that, instead of transferring the machine, Larkspur decides to grant the bank 15,000 of its common shares, which have a fair value of $196,000. This is in full settlement of the loan obligation. Assuming that Pearl Bank treats Larkspur's shares as FV-NI investments, prepare the entries to record the transaction for both parties. Assume Pearl had previously recognized an allowance for doubtful accounts for the impairment prior to the settlement. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter for the amounts.) Debit Credit Date Account Titles and Explanation Larkspur Inc. Dec. 31, 2020 Notes Payable 196000 Allowance for Doubtful Accounts Gain on Restructuring of Debt Common Shares Pearl Bank Dec. 31, 2020 FV-Ni Investments 196000 Allowance for Doubtful Accounts 39100 Notes Receivable Modification Gain or Loss