Question
On January 1, 2016, Worthylake Company sold used machinery to Brown Company, accepting a $30,000, non-interest-bearing note maturing on January 1, 2018. Worthylake carried the
On January 1, 2016, Worthylake Company sold used machinery to Brown Company, accepting a $30,000, non-interest-bearing note maturing on January 1, 2018. Worthylake carried the machinery on its books at a cost of $21,000 and a current book value of $14,000. Neither the fair value of the machinery nor the note was determinable at the time of sale; however, Browns incremental borrowing rate was 12%.
Table 1 - Future Value of 1: fn,i=(1 + i)n
Table 2 - Future Value of an Ordinary Annuity of 1: FO,n,i=(1 + i)n1i
Table 3 - Present Value of 1: pn,i=1(1 + i)n
Table 4 - Present Value of an Ordinary Annuity of 1: pO,n,i=11(1 + i)ni
Table 5 - Present Value of Annuity Due: pD,n,i=11(1 + i)n-1i+1
Required:
Prepare the journal entries on Worthylakes books to record: |
1. | sale of the machinery |
2. | related adjusting entries on December 31, 2016, and 2017 |
3. | payment of the note by Brown on January 1, 2018 |
CHART OF ACCOUNTS | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Worthylake Company | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
General Ledger | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Prepare the journal entries on Worthylakes books to record sale of the machinery on January 1, 2016. Additional Instructions
PAGE 1
GENERAL JOURNAL
DATE | ACCOUNT TITLE | POST. REF. | DEBIT | CREDIT | |
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1 |
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2 |
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3 |
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4 |
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5 |
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Prepare the journal entries on Worthylakes books to record related adjusting entries on December 31, 2016, and 2017. Additional Instructions
PAGE 2016PAGE 2017
GENERAL JOURNAL
DATE | ACCOUNT TITLE | POST. REF. | DEBIT | CREDIT | |
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1 |
| Adjusting Entries |
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2 |
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3 |
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Prepare the journal entries on Worthylakes books to record payment of the note by Brown on January 1, 2018. Additional Instructions
PAGE 1
GENERAL JOURNAL
DATE | ACCOUNT TITLE | POST. REF. | DEBIT | CREDIT | |
---|---|---|---|---|---|
1 |
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2 |
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