Michael Inc., a publicly accountable entity, sells specialized equipment on December 31,
Michael Inc., a publicly accountable entity, sells specialized equipment on December 31,
Chapter18: Accounting Periods And Methods
Section: Chapter Questions
Problem 18DQ
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![Michael Inc., a publicly accountable entity, sells specialized equipment on December 31, 2020. The equipment could have been purchased for a cash price of $3,250,000
however, the purchaser opted to sign a note payable with the following terms:
- interest payments of $75,000 on December 31, 2021, 2022, 2023 and 2024 and
- a final payment of $3,500,000 on December 31, 2024.
Required:
i)
ii)
Prepare all journal entries relative to this note for Michael Inc. (the seller) for the years ending December 31, 2020 and 2021.
If instead, Michael Inc. is a private company subject to ASPE, prepare the December 31, 2021 journal entry using the more simple method allowed under ASPE.](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Ffcc0431a-c095-4d25-9c94-6b14bec71f3c%2F2630cb20-2e98-4777-94bc-2b994a85ec58%2Fiasm0j_processed.png&w=3840&q=75)
Transcribed Image Text:Michael Inc., a publicly accountable entity, sells specialized equipment on December 31, 2020. The equipment could have been purchased for a cash price of $3,250,000
however, the purchaser opted to sign a note payable with the following terms:
- interest payments of $75,000 on December 31, 2021, 2022, 2023 and 2024 and
- a final payment of $3,500,000 on December 31, 2024.
Required:
i)
ii)
Prepare all journal entries relative to this note for Michael Inc. (the seller) for the years ending December 31, 2020 and 2021.
If instead, Michael Inc. is a private company subject to ASPE, prepare the December 31, 2021 journal entry using the more simple method allowed under ASPE.
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