On July 1, 2012, Rentoul Inc. made two sales. Rentoul Inc. recently had to pay 8
ID: 2378299 • Letter: O
Question
On July 1, 2012, Rentoul Inc. made two sales.
Rentoul Inc. recently had to pay 8% interest for money that it borrowed from British National Bank. The customers in these two transactions have credit ratings that require them to borrow money at 11% interest.
Record the two journal entries that should be recorded by Rentoul Inc. for the sales transactions above that took place on July 1, 2012. (Round present value factor calculations to 5 decimal places, e.g. 1.25124 and the final answers to 0 decimal places, e.g. $6,538. Credit account titles are automatically indented when the amount is entered. Do not indent manually.)
Sales And Interest
1. Should have 4 recorded transactions,
2. Should have 3 recorded transaction.
1. It sold land having a fair value of $905,000 in exchange for a 3-year zero-interest-bearing promissory note in the face amount of $1,237,708. The land is carried on Rentouls books at a cost of $596,000. 2. It rendered services in exchange for a 4%, 6-year promissory note having a face value of $409,600 (interest payable annually).Explanation / Answer
Rentoul Inc. recently had to pay 8% interest for money that it borrowed from British National Bank. The customers in these two transactions have credit ratings that require them to borrow money at 12% interest.
Date 7/1/12 Description/Account Notes Receivable Land Discount on Notes Receivable Gain on Sale of Land ($900,000 - $590,000)
Debit 1,416,163 Credit 590,000 *516,163 310,000
Computation of the discount $1,416,163 0.63552 $900,000 1,416,163 $516,163
2. Date 7/1/12 Face value of note Present value of 1 for 4 periods at 12%
Present value of note Face value of note Discount on note receivable Description/Account Notes Receivable Service Revenue Discount on Notes Receivable Computation of the present value of the note: Maturity value Present value of $400,000 due in 8 years at 12% - $400,000 0.40388
Present value of $12,000 payable annually for 8 years at 12% annually - $12,000 4.96764 $400,000 $161,552 59,612
Present value of the note and 221,164
Discount on note receivable $178,836
Related Questions
drjack9650@gmail.com
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.