Accounting for a Troubled Debt Settlement at December 31, 2014

Essay

Accounting for a troubled debt settlement At December 31, 2014, Oscar Ltd.owes Wilde Corp.for a $300,000 note payable, plus accrued interest of $27,000.Oscar is now in financial difficulty and cannot repay Wilde.To settle the debt, Wilde agrees to accept from Oscar equipment with a fair value of $285,000, an original cost of $420,000, and accumulated depreciation to date of $98,000. Instructions
a.Calculate the gain or loss to Oscar on the settlement of the debt.
b.Calculate the gain or loss to Oscar on the transfer of the equipment.
c.Prepare the journal entry on Oscar's books to record the settlement of the debt.
d.Prepare the journal entry on Wilde's books to record the settlement of the receivable.