On January 1, 2017, Fisher Company makes the two following acquisitions: Purchases land habing a fair market value of $800,000 by issuing a 5-year, zero-interest-bearing promissory note in the face amount of $1,175,464. Purchases equipment by issuing a 4%, 8-year promissory note having a maturity value of $350,000 (interest payable annually). The company has to pay 8% interest for funds from its bank. Instructions: Record the two journal entries that should be recorded by Fisher Company for the two purchases on January 1, 2017. Record the interest at the end of the first year on both notes using the effective-interest method.
On January 1, 2017, Fisher Company makes the two following acquisitions: Purchases land habing a fair market value of $800,000 by issuing a 5-year, zero-interest-bearing promissory note in the face amount of $1,175,464. Purchases equipment by issuing a 4%, 8-year promissory note having a maturity value of $350,000 (interest payable annually). The company has to pay 8% interest for funds from its bank. Instructions: Record the two journal entries that should be recorded by Fisher Company for the two purchases on January 1, 2017. Record the interest at the end of the first year on both notes using the effective-interest method.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Question
On January 1, 2017, Fisher Company makes the two following acquisitions:
- Purchases land habing a fair market value of $800,000 by issuing a 5-year, zero-interest-bearing promissory note in the face amount of $1,175,464.
- Purchases equipment by issuing a 4%, 8-year promissory note having a maturity value of $350,000 (interest payable annually).
The company has to pay 8% interest for funds from its bank.
Instructions:
- Record the two
journal entries that should be recorded by Fisher Company for the two purchases on January 1, 2017. - Record the interest at the end of the first year on both notes using the effective-interest method.
Expert Solution
Step 1
Journal entry: Journal entry is a set of economic events which can be measured in monetary terms. These are recorded chronologically and systematically.
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