)   Record the two journal entries that should be recorded by Sweet 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.

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
icon
Related questions
Question

On January 1, 2020, Sweet Company makes the two following acquisitions.

1.   Purchases land having a fair value of $260,000 by issuing a 5-year, zero-interest-bearing promissory note in the face amount of $458,209.
2.   Purchases equipment by issuing a 6%, 9-year promissory note having a maturity value of $410,000 (interest payable annually).


The company has to pay 12% interest for funds from its bank.

(a)   Record the two journal entries that should be recorded by Sweet 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.


(Round present value factor calculations to 5 decimal places, e.g. 1.25124 and the final answer to 0 decimal places e.g. 58,971. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts. Credit account titles are automatically indented when amount is entered. Do not indent manually.)

No.
Date
Account Titles and Explanation
Debit
Credit
(a) 1.
January 1, 2020
enter an account title to record the first purchase on January 1, 2017
 
enter a debit amount
 
enter a credit amount
 
   
enter an account title to record the first purchase on January 1, 2017
 
enter a debit amount
 
enter a credit amount
 
   
enter an account title to record the first purchase on January 1, 2017
 
enter a debit amount
 
enter a credit amount
 
2.
January 1, 2020
enter an account title to record the second purchase on January 1, 2017
 
enter a debit amount
 
enter a credit amount
 
   
enter an account title to record the second purchase on January 1, 2017
 
enter a debit amount
 
enter a credit amount
 
   
enter an account title to record the second purchase on January 1, 2017
 
enter a debit amount
 
enter a credit amount
 
(b) 1.
December 31, 2020
to record the interest on the first note using the effective-interest method on December 31, 2017
 
enter a debit amount
 
enter a credit amount
 
   
to record the interest on the first note using the effective-interest method on December 31, 2017
 
enter a debit amount
 
enter a credit amount
 
2.
December 31, 2020
to record the interest on the second note using the effective-interest method on December 31, 2017
 
enter a debit amount
 
enter a credit amount
 
   
to record the interest on the second note using the effective-interest method on December 31, 2017
 
enter a debit amount
 
enter a credit amount
 
   
to record the interest on the second note using the effective-interest method on December 31, 2017
 
enter a debit amount
 
enter a credit amount
 
Expert Solution
trending now

Trending now

This is a popular solution!

steps

Step by step

Solved in 3 steps with 2 images

Blurred answer
Knowledge Booster
Accounting for Financial Instruments
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.
Similar questions
  • SEE MORE QUESTIONS
Recommended textbooks for you
FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
Accounting
ISBN:
9781259964947
Author:
Libby
Publisher:
MCG
Accounting
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis…
Horngren's Cost Accounting: A Managerial Emphasis…
Accounting
ISBN:
9780134475585
Author:
Srikant M. Datar, Madhav V. Rajan
Publisher:
PEARSON
Intermediate Accounting
Intermediate Accounting
Accounting
ISBN:
9781259722660
Author:
J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:
McGraw-Hill Education
Financial and Managerial Accounting
Financial and Managerial Accounting
Accounting
ISBN:
9781259726705
Author:
John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:
McGraw-Hill Education