Trey Inc sells used machinery to Buyer Ltd. Buyer takes possession of the truck on October 1, 20X0 in exchange for a zero-interest bearing loan of $75,000 payable to Trey. The book value of the machinery is $55,000 (Cost = 120,000; Accumulated depreciation = 65,000). Settlement of the loan will take place on September 30, 20X2. Buyer's normal borrowing rate is 5%. Trey's fiscal year end is December 31. Required: (a) What will Trey report on its annual financial statements for the Loan Receivable (including the loan balance, interest Income, and gain/loss on sale of machinery) at December 31, 20X0? (b) Prepare the journal entry to derecognize the loan receivable at September 30, 20X2.

Trey Inc sells used machinery to Buyer Ltd. Buyer takes possession of the truck on October 1, 20X0 in exchange for a zero-interest bearing loan of $75,000 payable to Trey. The book value of the machinery is $55,000 (Cost = 120,000; Accumulated depreciation = 65,000). Settlement of the loan will take place on September 30, 20X2. Buyer's normal borrowing rate is 5%. Trey's fiscal year end is December 31. Required: (a) What will Trey report on its annual financial statements for the Loan Receivable (including the loan balance, interest Income, and gain/loss on sale of machinery) at December 31, 20X0? (b) Prepare the journal entry to derecognize the loan receivable at September 30, 20X2.

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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