FINANCIAL ACCOUNTING
10th Edition
ISBN: 9781259964947
Author: Libby
Publisher: MCG
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The following is an independent error made by a company that uses the periodic inventory system:
Equipment with a book value of $70,000 and a fair value of $100,000 was sold at the beginning of the year. A 2-year, non-interest-bearing note for $129,960 was received and recorded at its face value, and a gain of $59,960 was recognized. No interest revenue was recorded and 14% is a fair rate of interest.
What is the
What is the journal entry adjustment needed to correct interest related to the note?
Transcribed Image Text:A2-year, non-interest-bearing note for $129,960 was received and recorded at its face value, and a gain of $59,960 was recognized. You have enough information to calculate the interest
without PV tables by comparing the fair value of the equipment to the face value of the note, or by fixing the amount of the gain. Assume this entry was made:
PAGE 1
GENERAL JOURNAL
DATE
ACCOUNT TITLE
POST. REF.
DEBIT
CREDIT
Notes Receivable
Jan. 1
131
129,960.00
Accumulated Depreciation
198
10,000.00
181
80,000.00
Equipment
59,960.00
436
Gain on Sale of equipment
2.
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