CALCULATOR PRINTER VERSION BACK NEXT Dold Acrobats lent $16,52y to Donaldson, In

Question

CALCULATOR PRINTER VERSION BACK NEXT Dold Acrobats lent $16,52y to Donaldson, Inc., accepting Donaldson's 2-year, $2U,UUU, zero-interest-bearing note. lhe implied interest rate is 1U%e Prepare Dold's journal entries for the initial transaction, recognition of interest each year, and the collection of $20,000 at maturity. (Round answers to O decimal places, e.g. 5,275. 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 the amount is entered. Do not indent manually. No. Account Titles and Explanation 1. Debit To record the initial transations) 2. (To record the recognition of interest in year one) 3. (To racognize tha intarast in yoar 2) 4. To record the collection of the note) cy Policy 2000-2018 John Wiley &Sons Inc All Rights Reserved. A Division of John Wiley & Sons Inc Version 4.24.9.3

Explanation / Answer

No

Accounts title and Explanation

Debit

Credit

1

Notes Receivable

$    20,000

                 Cash

$ 16,529

                 Unearned Interest Revenue

$    3,471

(To record the initial Transaction)

2

Unearned Interest Revenue

$1,653

                 Interest Revenue

$ 1,653

(To record the recognition of Interest in year 1)

3

Unearned Interest Revenue

$ 1,818

                Interest Revenue

$ 1,818

(To record the Interest in year 2)

4

Cash

$ 20,000

       Notes Receivable

$ 20,000

(to record the collection of note)

Year

Beginning balance

Interest earned

Ending balance

1

$    16,529

$    1,653

$   18,182

2

$    18,182

$    1,818

$   20,000

At the beginning of the year the value of notes receivable is recorded to be $20,000 but its actual present value is $16,529 and $20,000 is after adding interest income earned in two years.

No

Accounts title and Explanation

Debit

Credit

1

Notes Receivable

$    20,000

                 Cash

$ 16,529

                 Unearned Interest Revenue

$    3,471

(To record the initial Transaction)

2

Unearned Interest Revenue

$1,653

                 Interest Revenue

$ 1,653

(To record the recognition of Interest in year 1)

3

Unearned Interest Revenue

$ 1,818

                Interest Revenue

$ 1,818

(To record the Interest in year 2)

4

Cash

$ 20,000

       Notes Receivable

$ 20,000

(to record the collection of note)

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