On January 1, 2019, Worthylake Company sold used machinery to Brown Company, accepting a $30,000, non-interest-bearing note maturing on January 1, 2021. 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, Brown's incremental borrowing rate was 12%. Required: Prepare the journal entries on Worthylake's books to record: 1. sale of the machinery 2. related adjusting entries on December 31, 2019, and 2020 3. payment of the note by Brown on January 1, 2021 ASSETS REVENUE 111 Cash 411 Sales Revenue 121 Accounts Receivable 431 Interest Income 125 Notes Receivable 436 Gain on Sale of Machinery 141 Inventory 152 Prepaid Insurance EXPENSES 162 Discount on Notes Receivable 173 Machinery 500 Cost of Goods Sold 511 Insurance Expense 181 Equipment 512 Utilities Expense 189 Accumulated Depreciation 521 Salaries Expense 532 Bad Debt Expense LIABILITIES 540 Interest Expense 211 Accounts Payable 541 Depreciation Expense 231 Salaries Payable 559 Miscellaneous Expenses 250 Unearned Revenue 910 Income Tax Expense 261 Income Taxes Payable EQUITY 311 Common Stock 331 Retained Earnings 1. Prepare the journal entries on Worthylake's books to record sale of the machinery on January 1, 2019. General Journal Instructions PAGE 1 GENERAL JOURNAL DATE ACCOUNT TITLE POST. REF. DEBIT CREDIT 2. Prepare the journal entries on Worthylake's books to record related adjusting entries on December 31, 2019, and 2020. General Journal Instructions PAGE 2019 PAGE 2020 GENERAL JOURNAL DATE POST. REF. DEBIT CREDIT ACCOUNT TITLE Adjusting Entries 3. Prepare the journal entries on Worthylake's books to record payment of the note by Brown on January 1, 2021. General Journal Instructions PAGE 1 GENERAL JOURNAL DATE ACCOUNT TITLE POST. REF. DEBIT CREDIT On January 1, 2019, Worthylake Company sold used machinery to Brown Company, accepting a $30,000, non-interest-bearing note maturing on January 1, 2021. 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, Brown's incremental borrowing rate was 12%. Required: Prepare the journal entries on Worthylake's books to record: 1. sale of the machinery 2. related adjusting entries on December 31, 2019, and 2020 3. payment of the note by Brown on January 1, 2021 ASSETS REVENUE 111 Cash 411 Sales Revenue 121 Accounts Receivable 431 Interest Income 125 Notes Receivable 436 Gain on Sale of Machinery 141 Inventory 152 Prepaid Insurance EXPENSES 162 Discount on Notes Receivable 173 Machinery 500 Cost of Goods Sold 511 Insurance Expense 181 Equipment 512 Utilities Expense 189 Accumulated Depreciation 521 Salaries Expense 532 Bad Debt Expense LIABILITIES 540 Interest Expense 211 Accounts Payable 541 Depreciation Expense 231 Salaries Payable 559 Miscellaneous Expenses 250 Unearned Revenue 910 Income Tax Expense 261 Income Taxes Payable EQUITY 311 Common Stock 331 Retained Earnings 1. Prepare the journal entries on Worthylake's books to record sale of the machinery on January 1, 2019. General Journal Instructions PAGE 1 GENERAL JOURNAL DATE ACCOUNT TITLE POST. REF. DEBIT CREDIT 2. Prepare the journal entries on Worthylake's books to record related adjusting entries on December 31, 2019, and 2020. General Journal Instructions PAGE 2019 PAGE 2020 GENERAL JOURNAL DATE POST. REF. DEBIT CREDIT ACCOUNT TITLE Adjusting Entries 3. Prepare the journal entries on Worthylake's books to record payment of the note by Brown on January 1, 2021. General Journal Instructions PAGE 1 GENERAL JOURNAL DATE ACCOUNT TITLE POST. REF. DEBIT CREDIT
