Question

Debtor obtained a loan from Creditor for $450. Guarantor agreed to guarantee the loan. Guarantor was paid $10 to be a guarantor. After several timely payments, Debtor defaulted. Debtor still owed $150 at the time of default. How much of the balance can Creditor obtain from Debtor?

Answer 1

Creditor will recover from debtor = outstanding balance + default cost
In this case there is default in repayment has been done, So money given to guarantor of $ 10
is no worth. So this cost also will be recovered. It is assumed guarantor expenses done by creditor.
So, Creditor will recover from debtor = $150 + $ 10 =$ 160
If there is an arrangement among debtor, creditor and us and both parties ledger is kept by us.
Then following journal entry will be done to adjust the same.
Creditor's A/c …………………..Dr	$ 160
To Debtor's A/c			$ 160