Question
Cool globe inc. entered into two transactions, as follows: 1. Purchased equipment paying $19,600 down and signed a non-interest bearing note requiring the balance to
Cool globe inc. entered into two transactions, as follows: 1. Purchased equipment paying $19,600 down and signed a non-interest bearing note requiring the balance to be paid in four installments of $19,600 on the anniversary date of the contract. Based on Cool Globe's 8% borrowing rate for such transactions the implicit interest cost is $19,743.
2. Purchased a tract of land in exchange for $11,400 cash down payment and a noninterest-bearing note requiring six $11,400 annual payments, with the first annual payment in one year. The fair value of the land is $64,400. Prepare the journal entries for these transactions.
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