Question
Supposed B borrows $100,000 from L and uses it to drill an oil well. B hits a dry hole and loses the entire $100,000 investment.
Supposed B borrows $100,000 from L and uses it to drill an oil well. B hits a dry hole and loses the entire $100,000 investment. Although B is solvent, L discharges the $40,000 of the debt. Journal entries to record these events might look like this: Cash $100,000 Debt payable $100,000 Loss on oil well $100,000 Cash $100,000 Debt payable $40,000 $40,000 Under the Whole Transaction theory, what account would be credited above for $40,000? Under the Freeing-of-Assets theory, what account would be credited above for $40,000? Under the Loan Proceeds theory, what account would be credited above for $40,000?
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