Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

(a) On January 1, 2020, Metlock Inc. purchased land that had an assessed value of $316,000 at the time of purchase. A $518,000, zero-interest-bearing note

(a) On January 1, 2020, Metlock Inc. purchased land that had an assessed value of $316,000 at the time of purchase. A $518,000, zero-interest-bearing note due January 1, 2023, was given in exchange. There was no established exchange price for the land, nor a ready fair value for the note. The interest rate charged on a note of this type is 12%. Determine at what amount the land should be recorded at January 1, 2020, and the interest expense to be reported in 2020 related to this transaction. (Round answers to 0 decimal places, e.g. 38,548.)

Land to be recorded at January 1, 2020 $
Interest expense to be reported $

(b) On January 1, 2020, Bonita Furniture borrowed $6,100,000 (face value) from Sinise Co., a major customer, through a zero-interest-bearing note due in 4 years. Because the note was zero-interest-bearing, Bonita Furniture agreed to sell furniture to this customer at lower than market price. A 10% rate of interest is normally charged on this type of loan. Prepare the journal entry to record this transaction. (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.)

Account Titles and Explanation

Debit

Credit

Determine the amount of interest expense to report for 2020. (Round answer to 0 decimal places, e.g. 38,548.)

Interest expense to be reported for 2020 $

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Forensic Accounting And Fraud Examination

Authors: Mary Jo Kranacher, Richard Riley

2nd Edition

1119494338, 9781119494331

More Books

Students also viewed these Accounting questions

Question

=+1-4 Describe the business functions in the value chain.

Answered: 1 week ago

Question

Conduct an effective performance feedback session. page 376

Answered: 1 week ago