Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Any help is appreciated! On January 1, 2020, Sidelines Company purchases equipment with an estimated 6-year useful life by making a $14,000 cash payment and

Any help is appreciated!

On January 1, 2020, Sidelines Company purchases equipment with an estimated 6-year useful life by making a $14,000 cash payment and issuing a noninterset-bearing note for $48,000 due in two years. The fair value of the the equipment is unknown. An 11% annual interest rate is typical of this transaction. The company uses the effective interest method to amortize interest expense and the straight-line method to estimate depreciation expense.

a. Prepare the entry to record the purchase on January 1, 2020. b. Prepare the entry on December 31, 2020, to record (1) interest expense and (2) depreciation expense. c. Indicate the balance sheet presentation related to this transaction as of December 31, 2020. d. Prepare the entry on December 31, 2021, to record (1) interest expense and payment of the note and (2) depreciation expense. e. Assume instead that Sidelines exchanged 1,000 shares of its own $10 par value common stock along with $14,000 cash for the equipment. At the date of the exchange, the stock was trading on the market at $40 per share. Prepare the entry to record the purchase of equipment.

  • Purchase of Equipment with Debt
  • Purchase of Equipment through Equity

a. Prepare the entry to record the purchase on January 1, 2020.

b. Prepare the entry on December 31, 2020, to record (1) interest expense and (2) depreciation expense.

c. Indicate the balance sheet presentation related to this transaction as of December 31, 2020.

Balance Sheet, Dec 31 2020
Assets:
Equipment, net Answer
Liabilities:
Note payable, net Answer

d. Prepare the entry on December 31, 2021, to record (1) interest expense and payment of the note and (2) depreciation expense.

e. Assume instead that Sidelines exchanged 1,000 shares of its own $10 par value common stock along with $14,000 cash for the equipment. At the date of the exchange, the stock was trading on the market at $40 per share. Prepare the entry to record the purchase of equipment.

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

Final Work On Internal Audit Internal Audit And Its Management

Authors: Silvia Mamani

1st Edition

6203099651, 978-6203099652

More Books

Students also viewed these Accounting questions

Question

=+b. What is the probability that the resulting pH exceeds 6.10?

Answered: 1 week ago

Question

1-4 How will MIS help my career?

Answered: 1 week ago