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.
Instructions
(a) Compute the amount of gain or loss to Elton, Inc. on the transfer (disposition) of the land.
(b) Compute the amount of gain or loss to Elton, Inc. on the settlement of the debt.
(c) Prepare the journal entry on Elton's books to record the settlement of this debt.
(d) Compute the gain or loss to Boston Co. from settlement of its receivable from Elton.
(e) Prepare the journal entry on Boston's books to record the settlement of this receivable.