Homework SourseOn January 1 2017 Flint Company makes the two following acqu
On January 1, 2017, Flint Company makes the two following acquisitions.
The company has to pay 12% interest for funds from its bank.
(Round present value factor calculations to 5 decimal places, e.g. 1.25124 and the final answer to 0 decimal places e.g. 58,971. If no entry is required, select \"No Entry\" for the account titles and enter 0 for the amounts. Credit account titles are automatically indented when amount is entered. Do not indent manually.)
No.
Date
Account Titles and Explanation
Debit
Credit
January 1, 2017
January 1, 2017
December 31, 2017
December 31, 2017
| 1. | Purchases land having a fair value of $300,000 by issuing a 5-year, zero-interest-bearing promissory note in the face amount of $528,703. | |
| 2. | Purchases equipment by issuing a 6%, 9-year promissory note having a maturity value of $340,000 (interest payable annually on January 1). |
Solution
Answer
| date | particulars | debit | credit |
| jan 1 ,2017 | land | 300000 | |
| discount on not payable | 228703 | ||
| TO note payable | 528703 | ||
| jan 1, 2017 | equipment | 231303 | |
| discount on not payable | 108697 | ||
| TO note payable | 340000 | ||
| ( 340000*0.36061)+(340000*6%*5.32824)=231303 | |||
| dec 31,2017 | interest | 36000 | |
| TO discount on note payable | 36000 | ||
| ( 300000 * 12 % ) | |||
| dec 31,2017 | interest expense | 27756 | |
| TO cash | 20400 | ||
| (231303*12%)-(340000*6%)=7356 | |||
