Vaughn Company owes $208,000 plus $18,700 of accrued interest to Bramble State Bank. The debt is a 10 -year, 10% note. During 2025 , Vaughn's business deteriorated due to a faltering regional economy. On December 31, 2025, Bramble State Bank agrees to accept an old machine and cancel the entire debt. The machine has a cost of $405,000, accumulated depreciation of $222,750, and a fair value of $187,000. (a) Prepare journal entries for Vaughn Company and Bramble State Bank to record this debt settlement. (If no entry is required, select "No Entry" for the account titles and enter O for the amounts. Credit account titles are automatically indented when the amount is entered. Do not indent manually. List all debit entries before credit entries.)