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On August 31, 2021, New Age Designs Inc. sold merchandise to Classic Motifs Co., accepting a 5%, 3-year promissory note of $428,800 in exchange. Interest
On August 31, 2021, New Age Designs Inc. sold merchandise to Classic Motifs Co., accepting a 5%, 3-year promissory note of $428,800 in exchange.
Interest is payable annually on August 31, starting August 31, 2022.
New Age Designs normally pays 6% interest to borrow funds. However, Classic Motifs normally pays 7% to borrow funds.
The product sold is carried on New Age Designs' books at a cost of $219,900.
New Age Designs has a year end of August 31 and uses IFRS
Required:
- Calculate the amount at which the product was sold to Classic Motifs Co.
- Prepare an amortization schedule for this note.
- Prepare the journal entries required to record this transaction in the books of New Age Designs on August 31, 2021.
- Prepare the journal entry required for this note by New Age Designs in 2022.
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