Company contracts to buy all of its lawnmowers from John Dee

Company contracts to buy all of its lawnmowers from John Deere in exchange for future discounts on lawnmower purchases. The present value of these discounts are valued at $20,000. Record the journal entry for this transaction.

Solution

SOLUTION:

The journal entry for this transaction

Dr. Investment $20,000

CR. Notes payable $20,000