Pearl Corporation issued a 4-year, $34,000, 4% note to Greenbush Company on Janu

Question

Pearl Corporation issued a 4-year, $34,000, 4% note to Greenbush Company on January 1, 2017, and received a computer that normally sells for $27,533. The note requires annual interest payments each December 31. The market rate of interest for a note of similar risk is 10% Prepare Pearl's journal entries tor (a) the January 1 issuance and (b) the December 31 interest. (Round answers to 0 decimal places, e.g. 38,548. 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.) Date Account Titles and Explanation li Tolit Credit (a) lanuary 1, 2017 (b) December 31, 2017

Explanation / Answer

No Date Account Titles and Explaination Debit Credit (a) January 1 2017 Computer $ 27,533 Discount on notes payable $   6,467 Notes Payable $ 34,000 (b) December 31 2017 Interest expense ($27,533 X 10%) $   2,753 Cash ($34,000 X 4%) $   1,360 Discount on notes payable $   1,393

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