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  • Strickland Inc Owes Heartland Bank 200 000 Plus 18 000 of Accrued PDF

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    Strickland Inc. owed Heartland Bank $200,000 plus $18,000 in accrued interest on a 10-year, 10% note. Due to economic slowing, the bank agreed to accept one of Strickland's machines worth $180,000 to cancel the entire debt. Both companies prepare financial statements according to IFRS.

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    Strickland Inc. owed Heartland Bank $200,000 plus $18,000 in accrued interest on a 10-year, 10% note. Due to economic slowing, the bank agreed to accept one of Strickland's machines worth $180,000 to cancel the entire debt. Both companies prepare financial statements according to IFRS.

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    47 views1 page

    Strickland Inc Owes Heartland Bank 200 000 Plus 18 000 of Accrued PDF

    Uploaded by

    Freelance Worker
    Strickland Inc. owed Heartland Bank $200,000 plus $18,000 in accrued interest on a 10-year, 10% note. Due to economic slowing, the bank agreed to accept one of Strickland's machines worth $180,000 to cancel the entire debt. Both companies prepare financial statements according to IFRS.

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    © All Rights Reserved
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    of 1

    Strickland Inc owes Heartland Bank 200 000 plus 18 000 of

    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
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