Question

Grouper Co. owes $198,200 to Monty Inc. The debt is a 10-year, 11% note. Because Grouper...

Grouper Co. owes $198,200 to Monty Inc. The debt is a 10-year, 11% note. Because Grouper Co. is in financial trouble, Monty Inc. agrees to accept some land and cancel the entire debt. The property has a book value of $98,000 and a fair value of $141,200.

(a) Prepare the journal entry on Grouper’s books for debt restructure.
(b) Prepare the journal entry on Monty’s books for debt restructure.


(If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts. Credit account titles are automatically indented when amount is entered. Do not indent manually.)

No.

Account Titles and Explanation

Debit

Credit

(a) Grouper Co.'s entry:
(b) Monty Inc. entry:

Homework Answers

Answer #1
Answer

a.

Account Title Debit Credit
Notes payable $     198,200
        Property $       98,000
        Gain on Debt Settlement $       43,200 141200-98000
        Settlement of debt gain $       57,000 198200-141200
( To record debt restructure )
b.
Property $     141,200
Loss on Debt Settlement $       57,000
              Notes Receivable $     198,200
( To record debt restructure )
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