Mann, Inc., which owes Doran Co. $800,000 in notes payable with accrues inerest of 72,000, is in financial difficulty. To settle the debt, Doran agress to accept from Mann equipment with a fair value of $760,000, an original cost of $1,120,000, and accumulated depreciation of $260,000.
Compute the gain or loss to Mann on the settlement of the debt.
Compute the gain of loss to Mann on the transfer of the equipment.
Prepare the journal entry on Mann's books to record the settlement of this debt.
Prepare the journal entry on Doran's books to record the settlement of the receivable.