Solution-What account would be credited

What account would be credited

Reference no: EM133027289

Question - Supposed B borrows $100,000 from L and uses it to drill an oil well. B hits a dry hole and loses the entire $100,000 investment. Although B is solvent, L discharges the $40,000 of the debt.

Journal entries to record these events might look like this:

Cash $100,000

Debt payable $100,000

Loss on oil well $100,000

Cash $100,000

Debt payable $40,000

$40,000

1. Under the "Whole Transaction" theory, what account would be credited above for $40,000?

2. Under the "Freeing-of-Assets" theory, what account would be credited above for $40,000?

3. Under the "Loan Proceeds" theory, what account would be credited above for $40,000?

Reference no: EM133027289

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What account would be credited

Reference no: EM133027289

Reference no: EM133027289

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