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On January 1, 2017, Nash Company makes the two following acquisitions. 1. Purchases land having a fair value of $360,000 by issuing a 5-year, zero-interest-bearing
On January 1, 2017, Nash Company makes the two following acquisitions.
1. | Purchases land having a fair value of $360,000 by issuing a 5-year, zero-interest-bearing promissory note in the face amount of $606,621. | |
2. | Purchases equipment by issuing a 7%, 8-year promissory note having a maturity value of $560,000 (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 Nash 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. |
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