Marin Company owes $225,000 plus $20,200 of accrued interest toHeadland State Bank. The debt is a 10-year, 10% note. During 2020,Marin’s business deteriorated due to a faltering regional economy.On December 31, 2020, Headland State Bank agrees to accept an oldmachine and cancel the entire debt. The machine has a cost of$317,000, accumulated depreciation of $174,350, and a fair value of$202,000.
Prepare journal entries for Marin Company and Headland StateBank to record this debt settlement. (If no entry isrequired, select "No Entry" for the account titles and enter 0 forthe amounts. Credit account titles are automatically indented whenamount is entered. Do not indent manually.)
No. | Date | Account Titles and Explanation | Debit | Credit |
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| | Marin Company (Debtor): | | |
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1. | December 31, 2020 | enter an account title to record the transaction for MarinCompany (Debtor) on December 31, 2020 | enter a debit amount | enter a credit amount |
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| | enter an account title to record the transaction for MarinCompany (Debtor) on December 31, 2020 | enter a debit amount | enter a credit amount |
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| | enter an account title to record the transaction for MarinCompany (Debtor) on December 31, 2020 | enter a debit amount | enter a credit amount |
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| | enter an account title to record the transaction for MarinCompany (Debtor) on December 31, 2020 | enter a debit amount | enter a credit amount |
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| | enter an account title to record the transaction for MarinCompany (Debtor) on December 31, 2020 | enter a debit amount | enter a credit amount |
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| | enter an account title to record the transaction for MarinCompany (Debtor) on December 31, 2020 | enter a debit amount | enter a credit amount |
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| | Headland State Bank (Creditor): | | |
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2. | December 31, 2020 | enter an account title to record the transaction for HeadlandState Bank (Creditor) on December 31, 2020 | enter a debit amount | enter a credit amount |
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| | enter an account title to record the transaction for HeadlandState Bank (Creditor) on December 31, 2020 | enter a debit amount | enter a credit amount |
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| | enter an account title to record the transaction for HeadlandState Bank (Creditor) on December 31, 2020 | enter a debit amount | enter a credit amount |
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| | enter an account title to record the transaction for HeadlandState Bank (Creditor) on December 31, 2020 | enter a debit amount | enter a credit amount |
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eTextbook and Media
List of Accounts
How should Marin report the following in its 2020 incomestatement?
| 1. | | Gain or loss on the disposition of machine | | select between gain andloss Ordinary GainOrdinary ExpenseOrdinary IncomeOrdinary Loss |
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| 2. | | Gain or loss on restructuring of debt | | select between gain andloss Ordinary GainOrdinary ExpenseOrdinary LossOrdinary Income |
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eTextbook and Media
List of Accounts
Assume that, instead of transferring the machine, Marin decidesto grant 12,000 shares of its common stock ($10 par) which has afair value of $202,000 in full settlement of the loan obligation.If Headland State Bank treats Marin’s stock as a tradinginvestment, prepare the entries to record the transaction for bothparties. (If no entry is required, select "No Entry"for the account titles and enter 0 for the amounts. Credit accounttitles are automatically indented when amount is entered. Do notindent manually.)
No. | Date | Account Titles and Explanation | Debit | Credit |
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| | Marin Company (Debtor): | | |
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1. | December 31, 2020 | enter an account title to record the transaction for MarinCompany (Debtor) on December 31, 2020 | enter a debit amount | enter a credit amount |
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| | enter an account title to record the transaction for MarinCompany (Debtor) on December 31, 2020 | enter a debit amount | enter a credit amount |
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| | enter an account title to record the transaction for MarinCompany (Debtor) on December 31, 2020 | enter a debit amount | enter a credit amount |
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| | enter an account title to record the transaction for MarinCompany (Debtor) on December 31, 2020 | enter a debit amount | enter a credit amount |
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| | enter an account title to record the transaction for MarinCompany (Debtor) on December 31, 2020 | enter a debit amount | enter a credit amount |
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| | Headland State Bank (Creditor): | | |
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2. | December 31, 2020 | enter an account title to record the transaction for HeadlandState Bank (Creditor) on December 31, 2020 | enter a debit amount | enter a credit amount |
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| | enter an account title to record the transaction for HeadlandState Bank (Creditor) on December 31, 2020 | enter a debit amount | enter a credit amount |
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| | enter an account title to record the transaction for HeadlandState Bank (Creditor) on December 31, 2020 | enter a debit amount | enter a credit amount |
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| | enter an account title to record the transaction for HeadlandState Bank (Creditor) on December 31, 2020 | enter a debit amount | enter a credit amount |
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