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mckenziecpa says...

I am an accountant

Here are the journals entries.

debit original mortgage $$$
credit loan term debt $$$

An allowance account is set up for the potential bad debt

bad debt expense income statement
allowance for bad debt balance sheet.

When the loan becomes bad, the loan is written off as follows a reversal of the original entry.
Cash is also debit
Debit long term note on mortgage $$$
Credit Bad Debt $$$

The cash hit the income statement its positive its a profit and so is the reduction in bad debit because it is written down.. The note well a debit takes it off the balance sheet.