At January 1, 2011, Transit Developments owed First City Bank Group $600,000, under an 11% note with three years remaining to maturity. Due to financial difficulties, Transit was unable to pay the previous years interest.
First City Bank Group agreed to settle Transit's debt in exchange for land having a fair value of $450,000. Transit purchased the land in 2007 for $325,000.
Required:
Prepare the journal entry(s) to record the restructuring of the debt by Transit Developments.