Cool Globe Inc. entered into two transactions, as follows: 1. Purchased equipment paying $20,000 at the date of purchase and signing a noninterest-bearing note requiring the balance to be paid in four annual installments of $20,000 on the anniversary date of the contract. Based on Cool Globe's 12% borrowing rate for such transactions, the implicit interest cost is $19,253. 2. Purchased a tract of land in exchange for $10,000 cash that was paid immediately and signed a noninterest-bearing note requiring five $10,000 annual payments. The first annual payment of the note is due in one year. The fair value of the land is $46,000. Required: Prepare the journal entries for these transactions. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)

Cool Globe Inc. entered into two transactions, as follows: 1. Purchased equipment paying $20,000 at the date of purchase and signing a noninterest-bearing note requiring the balance to be paid in four annual installments of $20,000 on the anniversary date of the contract. Based on Cool Globe's 12% borrowing rate for such transactions, the implicit interest cost is $19,253. 2. Purchased a tract of land in exchange for $10,000 cash that was paid immediately and signed a noninterest-bearing note requiring five $10,000 annual payments. The first annual payment of the note is due in one year. The fair value of the land is $46,000. Required: Prepare the journal entries for these transactions. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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On January 1, 2024, Nath-Langstrom Services, Incorporated, a computer software training firm, leased several computers under a two-year operating lease agreement from Computer World Leasing, which routinely finances equipment for other firms at an annual interest rate of 4%. The contract calls for four rent payments of $12,500 each, payable semiannually on June 30 and December 31 each year. The computers were acquired by ComputerWorld at a cost of $95, 000 and were expected to have a useful life of five years with no residual value. Both firms record amortization and depreciation semiannually. Note: Use tables, Excel, or a financial calculator. (FV of $1. PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) Required: Prepare appropriate journal entries recorded by Nath - Langstrom Services for the first year of the lease. Prepare appropriate journal entries recorded by Computer World Leasing for the first year of the lease.