Problem - Ludwig, Inc., which owes Giffin Co. $800,000in notes payable, is in financial difficulty. To eliminate the debt, Giffin agrees to acceptfrom Ludwig land having a fair market value of $610,000 and a recorded cost of $450,000.
Instructions
(a) Compute the amount of gain or loss to Ludwig, Inc. on the transfer (disposition) of the land.
(b) Compute the amount of gain or loss to Ludwig, Inc. on the settlement of the debt.
(c) Prepare the journal entry on Ludwig's books to record the settlement of this debt.
(d) Compute the gain or loss to Giffin Co. from settlement of its receivable from Ludwig.
(e) Prepare the journal entry onGiffin's books to record the settlement of this receivable.