On December 31, 2020, Pearl Limited acquired a machine from Pronghorn Corporation by issuing a $520,000, non–interest-bearing note that is payable in full on December 31, 2024. The company’s credit rating permits it to borrow funds from its several lines of credit at 10%. The machine is expected to have a five-year life and a $80,000 residual value. Record journal entries for December 31, 2020, Prepare any necessary adjusting entries related to depreciation of the asset (use straight-line) and amortization of the note (use the effective interest method) on December 31, 2021.
On December 31, 2020, Pearl Limited acquired a machine from Pronghorn Corporation by issuing a $520,000, non–interest-bearing note that is payable in full on December 31, 2024. The company’s credit rating permits it to borrow funds from its several lines of credit at 10%. The machine is expected to have a five-year life and a $80,000 residual value. Record journal entries for December 31, 2020, Prepare any necessary adjusting entries related to depreciation of the asset (use straight-line) and amortization of the note (use the effective interest method) on December 31, 2021.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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On December 31, 2020, Pearl Limited acquired a machine from Pronghorn Corporation by issuing a $520,000, non–interest-bearing note that is payable in full on December 31, 2024. The company’s credit rating permits it to borrow funds from its several lines of credit at 10%. The machine is expected to have a five-year life and a $80,000 residual value.
Record journal entries for December 31, 2020,
Prepare any necessary adjusting entries related to depreciation of the asset (use straight-line) and amortization of the note (use the effective interest method) on December 31, 2021.
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