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Prepare the journal entry for the purchase of tha land..

Prepare the journal entry for the purchase of tha land..

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Prepare the journal entry for the purchase of tha land..

On June 1, 2023, Tesla Corporation approached Gates Corporation about buying a parcel of undeveloped land. Gates was asking $240,000 for the land and Tesla saw that there was some flexibility in the asking price. Tesla did not have enough money to make a cash offer to Gates and proposed to give, in return for the land, a $300,000, five-year promissory note that bears interest at the rate of 4%. The interest is to be paid annually to Gates on June 1 of each of the next five years. Gates insisted that the note taken in return become a mortgage note. Tesla accepted the amended offer, and Tesla signed a mortgage note for $300,000 due June 1, 2028. Tesla would have had to pay 10% at its local bank if it were to borrow the cash for the land purchase. Gates, on the other hand, could borrow the funds at 9%. Both Tesla and Gates have calendar year ends.
Transcribed Image Text:On June 1, 2023, Tesla Corporation approached Gates Corporation about buying a parcel of undeveloped land. Gates was asking $240,000 for the land and Tesla saw that there was some flexibility in the asking price. Tesla did not have enough money to make a cash offer to Gates and proposed to give, in return for the land, a $300,000, five-year promissory note that bears interest at the rate of 4%. The interest is to be paid annually to Gates on June 1 of each of the next five years. Gates insisted that the note taken in return become a mortgage note. Tesla accepted the amended offer, and Tesla signed a mortgage note for $300,000 due June 1, 2028. Tesla would have had to pay 10% at its local bank if it were to borrow the cash for the land purchase. Gates, on the other hand, could borrow the funds at 9%. Both Tesla and Gates have calendar year ends.
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