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 f n,i (1 i) n Table 2 Future Value of an Ordinary Annuity of 1 F O,n,i (1 i) n 1 i Table 3 Present Value of 1 p n,i 1 (1 i) n Table 4 Present Value of an Ordinary Annuity of 1 p O,n,i 11 (1 i) n i Table 5 Present Value of Annuity Due p D,n,i 11 (1 i) n 1 i 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 ASSETS 111 Cash 121 Accounts Receivable 125 Notes Receivable 141 Inventory 152 Prepaid Insurance 162 Discount on Notes Receivable 173 Machinery 181 Equipment 189 Accumulated Depreciation LIABILITIES 211 Accounts Payable 231 Salaries Payable 250 Unearned Revenue 261 Income Taxes Payable EQUITY 311 Common Stock 331 Retained Earnings REVENUE 411 Sales Revenue 431 Interest Income 436 Gain on Sale of Machinery EXPENSES 500 Cost of Goods Sold 511 Insurance Expense 512 Utilities Expense 521 Salaries Expense 532 Bad Debt Expense 540 Interest Expense 541 Depreciation Expense 559 Miscellaneous Expenses 910 Income Tax Expense 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 1 2 3 4 5 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 1 Adjusting Entries 2 3 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 2

The Answer is in the image, click to view ...

Answered step by step

Verified Expert Solution

Link Copied!

Question

1 Approved Answer

Posted on Aug 23, 2024

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

	ASSETS
111	Cash
121	Accounts Receivable
125	Notes Receivable
141	Inventory
152	Prepaid Insurance
162	Discount on Notes Receivable
173	Machinery
181	Equipment
189	Accumulated Depreciation

	LIABILITIES
211	Accounts Payable
231	Salaries Payable
250	Unearned Revenue
261	Income Taxes Payable

	EQUITY
311	Common Stock
331	Retained Earnings

	REVENUE
411	Sales Revenue
431	Interest Income
436	Gain on Sale of Machinery

	EXPENSES
500	Cost of Goods Sold
511	Insurance Expense
512	Utilities Expense
521	Salaries Expense
532	Bad Debt Expense
540	Interest Expense
541	Depreciation Expense
559	Miscellaneous Expenses
910	Income Tax Expense