I NEED HELP AS SOON AS POSSIBLE PLEASE Exercise 1421 Part Le

I NEED HELP AS SOON AS POSSIBLE PLEASE

Exercise 14-21 (Part Level Submission) Buffalo Company owes $172,000 plus $14,900 of accrued interest to Carla State Bank. The debt is a 10-year, 10% note. During 2017, Buffalo\'s business deteriorated due to a faltering regional economy. On December 31, 2017, Carla State Bank agrees to accept an old machine and cancel the entire debt. The machine has a cost of $323,000, accumulate depreciation of $177,650, and a fair value of $149,000. (a) Prepare journal entries for Buffalo Company and Carla State Bank to record this debt settlement. (If no entry is required, select \"No Entry\" for the account titles and enter for the amounts. Credit account titles are automatically indented when amount is entered. Do not indent manually. Date Account Titles and Explanation Buffalo Company (Debtor): No. Debit Credit 1. December 31, 2017 Carla State Bank (Creditor: 2. December 31, 2017 Click if you would like to Show Work for this question: Attempts: 0 of 3 usedSAVE FOR LATER SUBMIT ANSWER

Solution

Buffalo Company (Debtor)

Finance Cost Dr. 14,900

To Interest Payable 14,900

(recognizing interest cost on the bank loan)

Interest Payable Dr.       14,900

To Bank Loan                   14,900

(Transferring Interest payment to Bank Loan)

Bank Loan Dr. 186,900 [172000+14900]

To Machine 149,000

To Profit & loss (Machine) 3,650

To Profit & loss (Bank loan) 34,250

(Being Loan settled with the machine on market value)

[ profit on machinery = 149000-(323000-177650)]

Carla State Bank (Creditor)

Interest Receivables Dr. 14,900

To Income                          14,900

(Being Interest Income Recognized)

Buffalo Co.’s loan Account dr. 14,900

To Interest Receivables             14,900

(being Interest Receivable transferred to loan account)

Machine Dr. 149,000

To Buffalo Co.’s loan account 186,900

To loss on loan                          37,900

(being Buffalo Co.’s Loan Account settled against machine)