Strickland Company owes $202,900 plus $18,600 of accrued interest to Moran State Bank. The debt is a 10-year, 10% note. During 2014, Stricklands business deteriorated due to a faltering regional economy. On December 31, 2014, Moran State Bank agrees to accept an old machine and cancel the entire debt. The machine has a cost of $397,600, accumulated depreciation of $218,680, and a fair value of $186,000. (a) Prepare journal entries for Strickland Company and Moran State Bank to record this debt settlement

(b) How should Strickland report the following in its 2014 income statement?

(c) Assume that, instead of transferring the machine, Strickland decides to grant 11,200 shares of its common stock ($10 par) which has a fair value of $186,000 in full settlement of the loan obligation. If Moran State Bank treats Stricklands stock as a trading investment, prepare the entries to record the transaction for both parties.