Strickland Inc Owes Heartland Bank 200 000 Plus 18 000 of Accrued PDF
Strickland Inc Owes Heartland Bank 200 000 Plus 18 000 of Accrued PDF
accrued #1226
Strickland Inc. owes Heartland Bank $200,000 plus $18,000 of accrued interest. The debt is a
10-year, 10% note. During 2014, Strickland's business declined due to a slowing regional
economy. On December 31, 2014, the bank agrees to accept an old machine and cancel the
entire debt. The machine has a cost of $390,000, accumulated depreciation of $221,000, and a
fair value of $180,000. The bank plans to dispose of the machine at a cost of $6,500. Both
Strickland and Heartland Bank prepare financial statements in accordance with IFRS.
Instructions
(a) Prepare the journal entries for Strickland Inc. and Heartland Bank to record this debt
settlement. Assume Heartland had previously recognized an allowance for doubtful accounts for
the impairment prior to the settlement.
(b) How should Strickland report the gain or loss on disposal of the machinery and on the
restructuring of debt in its 2014 income statement?
(c) Assume that instead of transferring the machine, Strickland decides to grant the bank 15,000
of its common shares, which have a fair value of $190,000. This is in full settlement of the loan
obligation. Assuming that Heartland Bank treats Strickland's shares as fair value-net income
investments, prepare the entries to record the transaction for both parties. Assume Heartland
had previously recognized an allowance for doubtful accounts for the impairment prior to the
settlement.
Strickland Inc owes Heartland Bank 200 000 plus 18 000 of accrued
ANSWER
http://paperinstant.com/downloads/strickland-inc-owes-heartland-bank-200-000-plus-18-000-of-
accrued/
1/1
Powered by TCPDF (www.tcpdf.org)