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%. 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
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