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Lauder Company has found itself in financial difficulty and has　decided to enter into an agreement...

Lauder Company has found itself in financial difficulty and has　decided to enter into an agreement with a creditor to transfer a piece of land to the creditor in exchange for a $200,000 note payable with $10,000 accrued interest. The land, which originally cost $100,000, has a current fair value of $150,000, but is expected to increase in value to $200,000 within the next year.

A.           Prepare the journal entries on Lauder Company’s books to record the transfer of the land.

              

      

　　　

      

       

B. Assuming the fair value of the land was $250,000, repeat the requirement in (A).

Business   Accounting   
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Answer #1

A.) Journal Entries in the books of lauder to record transfer of the Land: -

Note Payable A/c Dr. $200000

Accrued Interest A/c Dr. $10000

To Land A/c $100000

To Profit And Loss A/c $110000  

(Being Creditors paid off through transfer of Land and Lauder profited $110000 because $100000 Land transferred for a Creditors of $210000).

B.) Journal Entries in the books of lauder to record transfer of the Land (Assuming Land fair Value $250000 : -

There wouldn't be a change in the entry as costing is $100000 only, fair value change doesn't make any difference.

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