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Teal Mountain Inc. owes Headlands Bank $238,000 plus $15,200 of accrued interest. The debt is a 10-year, 10% note. During 2020. Teal Mountain's business declined
Teal Mountain Inc. owes Headlands Bank $238,000 plus $15,200 of accrued interest. The debt is a 10-year, 10% note. During 2020. Teal Mountain'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 $466,000, accumulated depreciation of $261,000, and a fair value of $218,000. The bank plans to dispose of the machine at a cost of $5,800. Both Teal Mountain and Headlands Bank prepare financial statements in accordance with IFRS 9. (a) Prepare the journal entries for Teal Mountain Inc. and Headlands Bank to record this debt settlement. Assume Headlands 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 O for the amounts.) Dec. 31, 2020 Teal Mountain Inc. Headlands Bank Dec. 31, Headlands Bank 2020
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