Answer:
Dr Land 125,000
Cr Gain on disposition of assets125,000
Dr Notes payable 600,000
Dr Interest payable 66,000
Cr Gain on troubled debt restructuring 216,000
Cr Land 450,000
Explanation:
Preparation of journal entry(s)
Based on the information given we were told that they group have agreed to settle Transit’s debt innexchange for land which have a fair value amount of $450,000 mean while the Transit purchased the land in 2017 for the amount of $325,000 which means that the Journal entry will be :
Dr Land 125,000
($450,000 – 325,000)
Cr Gain on disposition of assets125,000
Based on the information given we were told that Transit owed First City Bank Group the amount of $600,000 that has an 11% note which means that the Journal entry will be :
Dr Notes payable 600,000
Dr Interest payable 66,000
(11% x $600,000)
Cr Gain on troubled debt restructuring 216,000
Cr Land 450,000
