Cole, Inc., which owes Henry Co. $600,000 in notes payable with accrued interest of $54,000, is in financial difficulty. To settle the debt, Henry agrees to accept from Cole equipment with a fair value of $570,000, an original cost of $840,000, and accumulated depreciation of $195,000.
Instructions:
(a) Compute the gain or loss to Cole on the settlement of the debt.
(b)Compute the gain or loss to Cole on the transfer of the equipment.
(c)Prepare the journal entry on Cole's books to record the settlement of this debt.