Cool Globe Incorporated entered into two transactions, as follows: 1. Purchased equipment paying $20,900 at the date of purchase and signing a noninterest-bearing note requiring the balance to be paid in four annual installments of $20,900 on the anniversary date of the contract. Based on Cool Globe's 12% borrowing rate for such transactions, the implicit interest cost is $20,119. 2. Purchased a tract of land in exchange for $10,900 cash that was paid immediately and signed a noninterest-bearing note requiring five $10,900 annual payments. The first annual payment of the note is due in one year. The fair value of the land is $50,500. Required: Prepare the journal entries for these transactions. Note: If no entry is required for a transaction/event, select "No journal entry required" in the first account field.
Cool Globe Incorporated entered into two transactions, as follows: 1. Purchased equipment paying $20,900 at the date of purchase and signing a noninterest-bearing note requiring the balance to be paid in four annual installments of $20,900 on the anniversary date of the contract. Based on Cool Globe's 12% borrowing rate for such transactions, the implicit interest cost is $20,119. 2. Purchased a tract of land in exchange for $10,900 cash that was paid immediately and signed a noninterest-bearing note requiring five $10,900 annual payments. The first annual payment of the note is due in one year. The fair value of the land is $50,500. Required: Prepare the journal entries for these transactions. Note: If no entry is required for a transaction/event, select "No journal entry required" in the first account field.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:Cool Globe Incorporated entered into two transactions, as follows:
1. Purchased equipment paying $20,900 at the date of purchase and signing a noninterest-bearing note requiring the balance to
be paid in four annual installments of $20,900 on the anniversary date of the contract. Based on Cool Globe's 12% borrowing
rate for such transactions, the implicit interest cost is $20,119.
2. Purchased a tract of land in exchange for $10,900 cash that was paid immediately and signed a noninterest-bearing note
requiring five $10,900 annual payments. The first annual payment of the note is due in one year. The fair value of the land is
$50,500.
Required:
Prepare the journal entries for these transactions.
Note: If no entry is required for a transaction/event, select "No journal entry required" in the first account field.
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