On January 1, 2019, Tabor Company sold land with a book value of $50,000 to Wilson Company, accepting a $60,000 note, payable in three $20,000 annual installments beginning December 31, 2019. The note carried no stated interest rate and the fair values of the land and the note were not determinable. An appropriate interest rate for this note is 12%. Required: Prepare the journal entries on Tabor’s books to record (1) the sale and (2) the annual interest income and receipt of each $20,000 installment.

On January 1, 2019, Tabor Company sold land with a book value of $50,000 to Wilson Company, accepting a $60,000 note, payable in three $20,000 annual installments beginning December 31, 2019. The note carried no stated interest rate and the fair values of the land and the note were not determinable. An appropriate interest rate for this note is 12%. Required: Prepare the journal entries on Tabor’s books to record (1) the sale and (2) the annual interest income and receipt of each $20,000 installment.

Intermediate Accounting: Reporting And Analysis

3rd Edition

ISBN:9781337788281

Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Chapter14: Financing Liabilities: Bonds And Long-term Notes Payable

Section: Chapter Questions

Problem 14RE: On January 1, 2019, Boater Company issues a 20,000 non-interest-bearing, 5-year note for equipment....

See similar textbooks

Similar questions

On January 1, 2019, Park Company accepted a 36,000, non-interest-bearing, 3-year note from a major customer in exchange for used equipment. The equipment had originally cost Park 200,000 and had a book value of 20,000 on the date of the sale. At the 12% imputed interest rate for this type of loan, the present value of the note is 25,500 on January 1, 2019. Park uses the effective interest rate. What is the carrying value of the note receivable on Parks December 31, 2019, balance sheet? a. 28,560 b. 29,000 c. 32,500 d. 36,000
On January 1, 2019, Boater Company issues a 20,000 non-interest-bearing, 5-year note for equipment. Neither the fair value of the note nor the equipment is determinable. Boaters incremental borrowing rate is 9%. The asset has a useful life of 7 years. Prepare the journal entry for Boater to record the issuance of the note on January 1.
Straight Industries purchased a large piece of equipment from Curvy Company on January 1, 2019. Straight Industries signed a note, agreeing to pay Curvy Company $370,000 for the equipment on December 31, 2019. The market rate of interest for similar notes was 10%. The present value of $370.000 discounted at 10% for four years was $252,715. On January 1, 2019, Straight Industries recorded the purchase with a debit to equipment for $252,715 and a credit to notes payable for $252,715. On Straight Industries' balance sheet for the year ended December 31, 2019, the book value of the liability for notes payable, including accrued interest would be closest to: Multiple Cholce $277,987. $289.715. $285,208. $287.408.
On January 1, 2019, Tabor Company sold land with a book value of $50,000 to Wilson Company, accepting a $60,000 note, payable in three $20,000 annual installments beginning December 31, 2019. The note carried no stated interest rate and the fair values of the land and the note were not determinable. An appropriate interest rate for this note is 12%. 1. Prepare the journal entries on Tabor’s books to record the sale. 2. Prepare the journal entries on Tabor’s books to record the annual interest income and receipt of each $20,000 installment.
On January 1, 2018, Laramie Inc. acquired land for $6.2 million. Laramie paid $1.2 million in cash and signed a 6% note requiring the company to pay the remaining $5 million plus interest on December 31, 2019. An interest rate of 6% properly reflects the time value of money for this type of loan agreement. For what amount should Laramie record the purchase of land?
Webb Corporation purchased equipment from Shaw Corporation on January 1, 2019. Shaw accepted a 3-year, non-interest-bearing note of $18,000 due December 31, 2021, in exchange for the equipment. Neither the fair value of the equipment nor that of the note is available. Webb’s incremental borrowing rate is 12%. Required: Prepare the journal entries to record the issuance of the note, retirement, and any interest expense on the books of Webb on each of the following dates: 1. January 1, 2019 2. December 31, 2019 3. December 31, 2020 4. December 31, 2021
On January 1, 2019, Crouser Company sold land to Chad Company, accepting a 2-year, $150,000, non-interest-bearing note due January 1, 2021. The fair value of the land was $126,252.00 on the date of sale. The company purchased the land for $105,000 on January 1, 2013. Required: Prepare all the journal entries on Crouser’s books for January 1, 2019, through January 1, 2021, in regard to the Chad note.
On January 1, 2021, Byner Company purchased a used tractor. Byner paid $5,000 down and signed a noninterestbearing note requiring $25,000 to be paid on December 31, 2023. The fair value of the tractor is not determinable. An interest rate of 10% properly reflects the time value of money for this type of loan agreement. The company’s fiscal year-end is December 31. Required:1. Prepare the journal entry to record the acquisition of the tractor. Round computations to the nearest dollar.2. How much interest expense will the company include in its 2021 and 2022 income statements for this note?3. What is the amount of the liability the company will report in its 2021 and 2022 balance sheets for this note?
On January 1, 2021, Jalen Company purchased land costing $800,000. Instead of paying cash at the time of purchase, Jalen plans to make four installment payments of $215,221.64 on June 30 and December 31 in 2021 and 2022. The payments include interest at a rate of 6%. Required: 1. Record the purchase of land when the note is issued. 2. Record the first installment payment on June 30, 2021, and the second installment payment on December 31, 2021. 3. Calculate the balance of Notes Payable and Interest Expense on December 31, 2021.
On January 1, 2025, Splish Co. sells land for which it had paid $705,700 to Sargent Company, receiving in return Sargent's zero- interest-bearing note for $900,000 payable in 5 years. What entry would Splish make to record the sale, assuming that Splish frequently sells similar items of land for a cash sales price of $650,000? (If no entry is required, select "No Entry" for the account titles and enter o for the amounts. Credit account titles are automatically indented when the amount is entered. Do not indent manually. List all debit entries before credit entries) Date Account Titles and Explanation Jan. 1 Debit Credit
On January 1, 2019, Somerville Corporation sold a used truck to Cornelius Company and accepted a $28,000 non-interest-bearing note due January 1, 2020. Somerville carried the truck on its books at a cost of $30,000 and a current book value of $23,000. Neither the fair value of the truck nor the note was available at the time of the sale; however, Cornelius’s incremental borrowing rate was 12%. Required: 1. Prepare the journal entries on Somerville’s books to record: a. sale of the truck b. related adjusting entries on December 31, 2019, 2020, and 2021 c. collection of the note on January 1, 2022 2. Prepare the notes receivable portion of Somerville’s December 31, 2019, 2020, and 2021 balance sheets.
On January 1, 2018, Byner Company purchased a used tractor. Byner paid $5,000 down and signed a noninterest-bearing note requiring $25,000 to be paid on December 31, 2020. The fair value of the tractor is not determinable. An interest rate of 10% properly reflects the time value of money for this type of loan agreement. Thecompany’s fiscal year-end is December 31.Required:1. Prepare the journal entry to record the acquisition of the tractor. Round computations to the nearest dollar.2. How much interest expense will the company include in its 2018 and 2019 income statements for this note?3. What is the amount of the liability the company will report in its 2018 and 2019 balance sheets forthis note?