Problem:
Elton, Inc., which owes Boston Co. $900,000 in notes payable, is in financial difficulty. To eliminate the debt, Boston agrees to accept from Elton land having a fair market value of $680,000 and a recorded cost of $510,000.
Required:
Question 1: Compute the amount of gain or loss to Elton, Inc. on the transfer (disposition) of the land.
Question 2: Compute the amount of gain or loss to Elton, Inc. on the settlement of the debt.
Question 3: Prepare the journal entry on Elton's books to record the settlement of this debt.
Question 4: Compute the gain or loss to Boston Co. from settlement of its receivable from Elton.
Question 5: Prepare the journal entry on Boston's books to record the settlement of this receivable.
Note: Be sure to show how you arrived at your answer.