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On January 1, 2017, Ellen Carter Company makes the two following acquisitions. 1. Purchases land having a fair value of $200,000 by issuing a 5-year,

On January 1, 2017, Ellen Carter Company makes the two following acquisitions.

1. Purchases land having a fair value of $200,000 by issuing a 5-year, zero-interest-bearing promissory note in the face amount of $337,012.
2. Purchases equipment by issuing a 6%, 8-year promissory note having a maturity value of $250,000 (interest payable annually on January 1).

The company has to pay 11% interest for funds from its bank.

(a) Record the two journal entries that should be recorded by Ellen Carter Company for the two purchases on January 1, 2017.
(b) Record the interest at the end of the first year on both notes using the effective-interest method.

(Round present value factor calculations to 5 decimal places, e.g. 1.25124 and the final answer to 0 decimal places e.g. 58,971. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts. Credit account titles are automatically indented when amount is entered. Do not indent manually.)

No.

Date

Account Titles and Explanation

Debit

Credit

(a) 1.

January 1, 2017

enter an account title to record the first purchase on January 1, 2017

enter a debit amount

enter a credit amount

enter an account title to record the first purchase on January 1, 2017

enter a debit amount

enter a credit amount

enter an account title to record the first purchase on January 1, 2017

enter a debit amount

enter a credit amount

2.

January 1, 2017

enter an account title to record the second purchase on January 1, 2017

enter a debit amount

enter a credit amount

enter an account title to record the second purchase on January 1, 2017

enter a debit amount

enter a credit amount

enter an account title to record the second purchase on January 1, 2017

enter a debit amount

enter a credit amount

(b) 1.

December 31, 2017

to record the interest on the first note using the effective-interest method on December 31, 2017

enter a debit amount

enter a credit amount

to record the interest on the first note using the effective-interest method on December 31, 2017

enter a debit amount

enter a credit amount

2.

December 31, 2017

to record the interest on the second note using the effective-interest method on December 31, 2017

enter a debit amount

enter a credit amount

to record the interest on the second note using the effective-interest method on December 31, 2017

enter a debit amount

enter a credit amount

to record the interest on the second note using the effective-interest method on December 31, 2017

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