On January 1, 2019, Somerville Corporation sold a used truck to Cornelius Company and accepted a $28,000
Question:
On January 1, 2019, Somerville Corporation sold a used truck to Cornelius Company and accepted a $28,000 non-interest-bearing note due January 1, 2020. Somerville carried the truck on its books at a cost of $30,000 and a current book value of $23,000. Neither the fair value of the truck nor the note was available at the time of the sale; however, Cornelius’s incremental borrowing rate was 12%.
Required:
1. Prepare the journal entries on Somerville’s books to record:
a. Sale of the truck
b. Related adjusting entries on December 31, 2019, 2020, and 2021
c. Collection of the note on January 1, 2022
2. Prepare the notes receivable portion of Somerville’s December 31, 2019, 2020, and 2021 balance sheets.
A Corporation is a legal form of business that is separate from its owner. In other words, a corporation is a business or organization formed by a group of people, and its right and liabilities separate from those of the individuals involved. It may...
Step by Step Answer:
1 a 2019 Jan 1 Notes Receivable 2800000 Accumulated Depreciation 30000 23000 book value 700000 Los...View the full answer
Intermediate Accounting Reporting and Analysis
ISBN: 978-1337788281
3rd edition
Authors: James M. Wahlen, Jefferson P. Jones, Donald Pagach
