Exercise 14-18 On January 1, 2017, Larkspur Co. borrowed and received $470,000 f
ID: 2589084 • Letter: E
Question
Exercise 14-18
On January 1, 2017, Larkspur Co. borrowed and received $470,000 from a major customer evidenced by a zero-interest-bearing note due in 5 years. As consideration for the zero-interest-bearing feature, Larkspur agrees to supply the customer’s inventory needs for the loan period at lower than the market price. The appropriate rate at which to impute interest is 9%.
(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
December 31, 2017
(To record Interest Expense)
December 31, 2017
(To record Unearned Sales Revenue)
Your answer is partially correct. Try again.Explanation / Answer
Solution:-
a. Jan 1,2017
Bank A/c Dr $470,000
To Loan from Larskpur A/c $470,000
(Being Note amount received from Larskpur)
b. Dec 31,2017
Interest Expenses A/c Dr $33840 ((470000-(470000/5))*9/100)
To Loan from Larkspur A/c $33840
(Being Interest Expenses Made Due)
Loan from Larkspur A/c Dr $33840
To Sales Revenue A/c $33840
(Being Adjusted Entry to record Unearned Sales revenue)
Related Questions
drjack9650@gmail.com
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.