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  1. business
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  3. supposed b borrows $100,000 from l and uses it to

Supposed B borrows $100,000 from L and uses it to drill an oil well. B...

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Accounting

Supposed B borrows $100,000 from L and uses it to drill an oil well. B hits a dry hole and loses the entire $100,000 investment. Although B is solvent, L discharges the $40,000 of the debt.

Journal entries to record these events might look like this:

Cash$100,000

Debt payable$100,000

Loss on oil well$100,000

Cash $100,000

Debt payable $40,000

$40,000

1.Under the "Whole Transaction" theory, what account would be credited above for $40,000?

2.Under the "Freeing-of-Assets" theory, what account would be credited above for $40,000?

3.Under the "Loan Proceeds" theory, what account would be credited above for $40,000?

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