Irving Corporation operates a retail clothing store. On May 1, 2017 Irving purchases a new truck having a list price of $100,000 by making a down payment of $20,000 cash and issuing a zero-interest-bearing note with a face amount of $80,000. The note is due May 1, 2018. Irving would normally have to pay interest at a rate of 12% for such a borrowing, and the dealership has an incremental borrowing rate of 10%. Instructions: Prepare the necessary entries on May 1 and December 31 assuming the company has a calendar year end and uses the straight-line method of amortization.
Irving Corporation operates a retail clothing store. On May 1, 2017 Irving purchases a new truck having a list price of $100,000 by making a down payment of $20,000 cash and issuing a zero-interest-bearing note with a face amount of $80,000. The note is due May 1, 2018. Irving would normally have to pay interest at a rate of 12% for such a borrowing, and the dealership has an incremental borrowing rate of 10%. Instructions: Prepare the necessary entries on May 1 and December 31 assuming the company has a calendar year end and uses the straight-line method of amortization.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Irving Corporation operates a retail clothing store. On May 1, 2017 Irving purchases a new truck having a list price of $100,000 by making a down payment of $20,000 cash and issuing a zero-interest-bearing note with a face amount of $80,000. The note is due May 1, 2018. Irving would normally have to pay interest at a rate of 12% for such a borrowing, and the dealership has an incremental borrowing rate of 10%. Instructions:
Prepare the necessary entries on May 1 and December 31 assuming the company has a calendar year end and uses the straight-line method of amortization.
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