*Practice Exercise 7-4 On December 31, 2017, Sunland Co. sold equipment to Splis
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*Practice Exercise 7-4 On December 31, 2017, Sunland Co. sold equipment to Splish Brothers, Inc. Sunland Co. agreed to accept a $560,000 zero-interest-bearing note due December 31, 2019, as payment in full. Splish Brothers, Inc. incorporated in 2017 and had very little credit history at the time of the transaction with Sunland. Therefore, at that time, Splish Brothers typically borrowed funds at a rate of 10%. Sunland has a long and positive credit history. Therefore, Sunland has various lines of credit at 5% Prepare the journal entry to record the transaction of December 31, 2017, for Sunland Co. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts. Round present value factor calculations to 5 decimal places, e.g. 1.25124.) Account Titles and Explanation Debit Credit Interest Expense 507936.5079 Assuming Sunland Co.'s fiscal year-end is December 31, prepare the journal entry for December 31, 2018 (Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.) Account Titles and Explanation Debit Credit Assuming Sunland Co.'s fiscal-year end is December 31, prepare the journal entries for December 31, 2019 (Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.) Account Titles and Explanation Debit Credit Question Attempts: 0 of 1 usedExplanation / Answer
Date Account title and explanation Debit Credit Remarks 12/31/2017 Note Receivable a/c Dr 560000.00 To Discount on note receivable a/c Dr 52063.49 560000-507936.51 To Equipment a/c Cr 507936.51 Value of the equipment is calculated asPV(0.05,2,,-560000,0) (Being equipment sold against zero interest bond) 12/31/2018 Discount on note receivable a/c Dr $25,396.83 507936.51*5% To Interest income receivable a/c Cr $25,396.83 (Being interest income recorded for the year) 12/31/2019 Discount on note receivable a/c Dr $26,666.67 (507936.51+25396.83)*5% interest on interest also need to be calculated as it is not received in 2018 To Interest income receivable a/c Cr $26,666.67 (Being interest income recorded for the year) 12/31/2019 Cash a/c Dr $5,60,000.00 To Note receiable a/c Cr $5,07,936.51 To Interest income receivable a/c Dr $52,063.49 25396.83+26666.67 (Being amount received on note)
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