Record the 1/1/14 transaction for Fishbone Corporation and all necessary entries
ID: 2401269 • Letter: R
Question
Record the 1/1/14 transaction for Fishbone Corporation and all necessary entries from 2014-2016.
Record the 1/1/14 transaction for Lost Company and all necessary entries from 2014-2016.
On January 1, 2014, Fishbone Corporation sold equipment to Lost Company that cost $250,000 and that had accumulated depreciation of $100,000 on the date of sale. Fishbone received as consideration a $240,000 non-interest-bearing note due on December 31, 2016. The prevailing rate of interest for a note of this type on January 1, 2014, was 5%.
Explanation / Answer
Note: Total Interest payable on Dec 31, 2016 Amount of Notes 240000 PVF @ 5% for Yr-3 0.8638 Present value of Note 207312 Total Interest payable on Dec 31, 2016 32688 Total Amount received on sale 207312 Less: Book value of Assets sold 150000 Gain on sale of assets 57312 Journal Entries Fishborne Corporation: Date Accounts title and explanation Debit $ Credit $ Jan1 2014 Notes receivable Account Dr. 240000.00 Accumulated depreciation Dr. 100000 Equipment account 250000 Gain on sale on assets 57312 Interest receivable Account 32688 Dec 31 2014 Interest receivable Account Dr. 10370 Interest revenue account 10370 (207312*5%) Dec312015 Interest receivable Account Dr. 10888 Interest revenue account 10888 (207312+10366)*5% Dec 31 2016 Interest receivable Account Dr. 11430 Interest revenue account 11430 (207312+10366+10884)*5% Dec312014 Cash account Dr. 240000 Notes receivable Account 240000 Journal entries Lost Company: Date Accounts title and explanation Debit $ Credit $ Jan 1 2014 Equipment Account Dr. 207312 Interest payable Account Dr. 32688 Notes payable Account 240000 31.12.14 Interest expense Account dr. 10370 Interest payable account 10370 31.12.15 Interest expense Account dr. 10888 Interest payable account 10888 31.12.16 Interest expense Account dr. 11430 Interest payable account 11430 31.12.16 Notes payable Account Dr. 240000 Cash account 240000
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