Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

On January 1, 2015, Second Time Around Clothing sold inventory costing $65,000 to The Party Place. In return, Second Time Around Clothing received a 4-year,

On January 1, 2015, Second Time Around Clothing sold inventory costing $65,000 to The Party Place. In return, Second Time Around Clothing received a 4-year, 9% note with a face value of $95,000. Blended payments will be made yearly on December 31, and will include principal and interest. The market rate of interest is 12%. Second Time Around Clothing has a December 31 year-end while The Party Place's year-end is September 30. Please make sure your final answer(s) are accurate to the nearest whole number. a) Calculate the annual payments Second Time Around Clothing will receive each year from The Party Place. Use the stated rate of the note in your calculation.

b) Complete the following payment and amortization schedule for the note.

Cash Interest income 12% principal reducation carrying value if note
jan 1 2015 X X X
dec 31 2015
dec 31 2016
dec 31 2017
dec 31 2018

c) Record the journal entries for Second Time Around Clothing on January 1, 2015 and December 31, 2015. Enter an appropriate description when entering the transactions in the journal. Dates must be entered in the format dd/mmm (ie. January 15 would be 15/Jan).

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

More Books

Students also viewed these Accounting questions