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Question(s) / Instruction(s):

*Ex. 14-66—Accounting for a troubled debt settlement.
Bates, Inc., which owes Glenn Co. $400,000 in notes payable with accrued interest of $36,000, is in financial difficulty. To settle the debt, Glenn agrees to accept from Bates equipment with a fair value of $380,000, an original cost of $560,000, and accumulated depreciation of $130,000.

Instructions
(a)     Compute the gain or loss to Bates on the settlement of the debt.
(b)     Compute the gain or loss to Bates on the transfer of the equipment.
(c)     Prepare the journal entry on Bates' books to record the settlement of this debt.
(d)     Prepare the journal entry on Glenn's books to record the settlement of the receivable.

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