On January 1, 2020, Blossom Company makes the two following acquisitions. 1. Purchases land having a fair value of $160,000 by issuing a 5-year, zero-interest-bearing promissory note in the face amount of $257,682. 2. Purchases equipment by issuing a 7%, 8-year promissory note having a maturity value of $230,000 (interest payable annually). The company has to pay 10% interest for funds from its bank. (a) Record the two journal entries that should be recorded by Blossom Company for the two purchases on January 1, 2020. (b) Record the interest at the end of the first year on both notes using the effective-interest method.
On January 1, 2020, Blossom Company makes the two following acquisitions. 1. Purchases land having a fair value of $160,000 by issuing a 5-year, zero-interest-bearing promissory note in the face amount of $257,682. 2. Purchases equipment by issuing a 7%, 8-year promissory note having a maturity value of $230,000 (interest payable annually). The company has to pay 10% interest for funds from its bank. (a) Record the two journal entries that should be recorded by Blossom Company for the two purchases on January 1, 2020. (b) Record the interest at the end of the first year on both notes using the effective-interest method.
Intermediate Accounting: Reporting And Analysis
3rd Edition
ISBN:9781337788281
Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Chapter14: Financing Liabilities: Bonds And Long-term Notes Payable
Section: Chapter Questions
Problem 11P
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On January 1, 2020, Blossom Company makes the two following acquisitions. 1. Purchases land having a fair value of $160,000 by issuing a 5-year, zero-interest-bearing promissory note in the face amount of $257,682. 2. Purchases equipment by issuing a 7%, 8-year promissory note having a maturity value of $230,000 (interest payable annually). The company has to pay 10% interest for funds from its bank. (a) Record the two
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