DEvin development co sold a building to Timex Co. as a restaurant site on Jan 1,
ID: 2366727 • Letter: D
Question
DEvin development co sold a building to Timex Co. as a restaurant site on Jan 1,2009.Devin accepted in exchange a five-year note having a maturity value of $100,000 and no stated interest rate. The building originally cost Devin $80,000 and had correctly recorded accumulated depreciation of $10,000 as of the date on the sale.The building had a fair market value of $78,353 on the date of sale.1.Based on the above information prepare the journal entry to record the sale of the building on Jan1, 2009
2. Prepare any journal entries (if necessary)that would be required related to the Note Receivable at the end of 2009,2010,2011, and 2012
3.Assume that $100,000 is received from Timex co on 12/31/2013.prepare all necessary journal entries for 2013.
Explanation / Answer
ACCOUNT 1 Jan'09 Note receivable Dr 100,000 Accumulated Dep Dr 10000 Discount on note receivable Dr11,647 Building Cr 80,000 Gain on sale of building Cr 8,353 journal entry to record the sale of the building on Jan1, 2009 In the years 2009 through 2013, the Ddevin will record a total of $11647 of interest revenue. In absence of any Interest rate, the company could simply use the straight-line method to record $2329.40 per year ($11647 ÷ 5 years), as shown in the following journal entry from 2009 to 2012: Discount on Notes Receivable Dr 2329.40 Interest Revenue Cr 2329.40 31 Dec 2013 Cash Dr 100,000 Note Rx Cr 100,000 $100,000 is received from Timex co
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