Luchando Company has a loan with a principal balance of $800,000, which is currently due. Luchando is experiencing financial difficulties and can't make the payment. The bank agrees to accept the following in full payment of the loan:
•Cash of $100,000
•Merchandise (book value $400,000, fair value $340,000)
•Equipment (book value $250,000, fair value $270,000)
Required
Make the appropriate entry or entries necessary to record the settlement of the debt on Luchando's books.

Question

Quizplus · Accepted Answer

The Answer of Luchando Company has a loan with a principal balance of $800,000, which is currently due. Luchando is experiencing financial difficulties and can't make the payment. The bank agrees to accept the following in full payment of the loan:
•Cash of $100,000
•Merchandise (book value $400,000, fair value $340,000)
•Equipment (book value $250,000, fair value $270,000)
Required
Make the appropriate entry or entries necessary to record the settlement of the debt on Luchando's books.

Luchando Company Has a Loan with a Principal Balance of $800,000