Principles Of Taxation For Business And Investment Planning 2020 Edition
23rd Edition
ISBN: 9781259969546
Author: Sally Jones, Shelley C. Rhoades-Catanach, Sandra R Callaghan
Publisher: McGraw-Hill Education
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Textbook Question
Chapter 6, Problem 2IRP
Corporation DS owns assets worth $550,000 and has $750,000 outstanding debts. One of DS’s creditors just informed DS that it is writing off a $15,000
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Crane, Inc., which owes Windsor Co. $3,280,000 in notes payable, is in financial difficulty. To eliminate the debt, Windsor agrees to
accept from Crane land having a fair value of $2,501,000 and a recorded cost of $1,845,000.
Prepare the journal entry on Crane's books to record the restructuring of this debt. (Credit account titles are automatically indented
when the amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter O for the
amounts. List all debit entries before credit entries.)
Account Titles and Explanation
Notes Payable
Land
Gain on Disposal of Land
Gain on Restructuring of Debt
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3280000
Credit
1845000
656000
779000
Government claims to unpaid taxes
Salary during last month owed to Mr. Key (not an officer)
Administrative expenses
Salary during last month owed to Ms. Rankin (not an officer)
Unsecured accounts payable
Required:
Indicate how much money will be paid to the creditor associated with each debt.
Types of Debts
Administrative expenses
Salary during last month owed to Mr. Key and Ms. Rankin
Government claims to unpaid taxes
Amounts
$
4,150
$ 7,700
19,525
4,150
5,930
8,250
Lolo Co. owes $150,000 in notes payable plus $12,000 of accrued interest to, the company is
having financial difficulty.
Prepare the journal entry on Lolo Co. 's books to record the settlement of this debt
under the following independent cases:
a) To eliminate the debt, the creditor agrees to accept from Lolo Co. land having a fair
value of $140,000 and a recorded cost of $145,000.
b) To eliminate the debt, the creditor agrees to take an equity interest in Lolo Co. Lolo
Co issued 10,000 ordinary shares having a fair value of $14 per share and $5 par value
per share.
c) To eliminate the debt, the creditor agrees to restructure the debt by issuing a new zero
interest bearing note with $170,000 face value for 3 years. The market interest rate of
similar notes is 9%.
Chapter 6 Solutions
Principles Of Taxation For Business And Investment Planning 2020 Edition
Ch. 6 - Prob. 1QPDCh. 6 - Prob. 2QPDCh. 6 - Prob. 3QPDCh. 6 - Prob. 4QPDCh. 6 - For many years, Mr. K, the president of KJ Inc.,...Ch. 6 - Prob. 6QPDCh. 6 - Prob. 7QPDCh. 6 - Firm NB, which uses the cash method of accounting,...Ch. 6 - Prob. 9QPDCh. 6 - Prob. 10QPD
Ch. 6 - Prob. 11QPDCh. 6 - Firms generally prefer to engage in transactions...Ch. 6 - Describe the contrasting treatment of prepaid...Ch. 6 - Net operating losses can be carried forward...Ch. 6 - Nello Company owed 23,400 overdue rent to its...Ch. 6 - For each of the following businesses, indicate the...Ch. 6 - Assuming a 21 percent marginal tax rate, compute...Ch. 6 - Prob. 4APCh. 6 - FruAgro Company has average annual gross receipts...Ch. 6 - Prob. 6APCh. 6 - Firm F is a cash basis legal firm. In 2018, it...Ch. 6 - Prob. 8APCh. 6 - Prob. 9APCh. 6 - Prob. 10APCh. 6 - Brillo Company uses the calendar year and the cash...Ch. 6 - NC Company, a retail hardware store, began...Ch. 6 - Prob. 13APCh. 6 - Warren Company is a calendar year, cash basis...Ch. 6 - Prob. 15APCh. 6 - Wahoo Inc., a calendar year taxpayer, leases...Ch. 6 - Prob. 17APCh. 6 - Using a 21 percent rate, compute the deferred tax...Ch. 6 - Prob. 19APCh. 6 - Prob. 20APCh. 6 - Prob. 21APCh. 6 - Prob. 22APCh. 6 - Prob. 23APCh. 6 - Prob. 24APCh. 6 - Prob. 25APCh. 6 - Prob. 26APCh. 6 - Prob. 27APCh. 6 - BZD, a calendar year corporation, made the...Ch. 6 - Prob. 29APCh. 6 - Prob. 30APCh. 6 - Prob. 31APCh. 6 - Prob. 32APCh. 6 - Prob. 33APCh. 6 - GK Company, a calendar year accrual basis...Ch. 6 - Prob. 35APCh. 6 - Prob. 36APCh. 6 - TRW Inc. began business in 2019 and incurred net...Ch. 6 - Prob. 38APCh. 6 - Prob. 39APCh. 6 - Margaret, a married taxpayer filing a joint...Ch. 6 - Prob. 41APCh. 6 - Prob. 1IRPCh. 6 - Corporation DS owns assets worth 550,000 and has...Ch. 6 - Two years ago, a professional theater company paid...Ch. 6 - Prob. 4IRPCh. 6 - Prob. 5IRPCh. 6 - Prob. 6IRPCh. 6 - Every December, Maxo Inc., an accrual basis,...Ch. 6 - Prob. 8IRPCh. 6 - Prob. 9IRPCh. 6 - Corporation WJ began business in 2019 and elected...Ch. 6 - Prob. 11IRPCh. 6 - Bontaine Publications, an accrual basis, calendar...Ch. 6 - Prob. 2RPCh. 6 - Prob. 3RPCh. 6 - Prob. 4RPCh. 6 - Company Y began business in February 2019. By the...Ch. 6 - Prob. 2TPC
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