Skysong Inc. owes Sweet Acacia Bank $190,000 plus $17,900 of accrued interest. The debt is a 10-year, 10% note. During 2020, Skysongs 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 $350,000, accumulated depreciation of $215,000, and a fair value of $170,000. The bank plans to dispose of the machine at a cost of $5,900. Both Skysong and Sweet Acacia Bank prepare financial statements in accordance with IFRS 9.

Assume that, instead of transferring the machine, Skysong decides to grant the bank 15,000 of its common shares, which have a fair value of $182,000. This is in full settlement of the loan obligation. Assuming that Sweet Acacia Bank treats Skysongs shares as FV-NI investments, prepare the entries to record the transaction for both parties. Assume Sweet Acacia had previously recognized an allowance for doubtful accounts for the impairment prior to the settlement.

Debit Credit Date Account Titles and Explanation Skysong Inc. Dec 31, 2020 US XX Sweet Acacia Bank Dec. 31, 20207 X xi Debit Credit Date Account Titles and Explanation Skysong Inc. Dec 31, 2020 US XX Sweet Acacia Bank Dec. 31, 20207 X xi