Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

On January 1, 2021, Charlottetown Manufacturing Inc. sold an old machine used in one of its factories to Truro Corporation in exchange for a non-interest

image text in transcribed
On January 1, 2021, Charlottetown Manufacturing Inc. sold an old machine used in one of its factories to Truro Corporation in exchange for a non-interest bearing note due January 1, 2023. The agreement of sale between Charlottetown and Truro made no mention of interest. Charlottetown has a December 31 year end. Other information pertaining to this transaction follows: Face value of the non-interest bearing note Original cost of machine to Charlottetown Manufacturing Book value of machine to Charlottetown Manufacturing Truro Corporation has a credit rating that requires it to pay the following rate on borrowed funds: $ 316,000 $ 675,720 $ 250,016 7% Required: 1. Calculate the present value of the note on January 1, 2021. (2 marks) 2. Prepare the journal entry for Charlottetown on the date of sale of the machine. (2 marks) 3. Prepare the journal entries for Charlottetown for the recognition of interest on the note on December 31 of each year. (3.5 marks) 4. Prepare the journal entry for Charlottetown for the collection of the note at maturity. (0.5 marks)

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Financial Accounting Theory And Analysis Text And Cases

Authors: Richard G. Schroeder, Myrtle W. Clark, Jack M. Cathey

9th Edition

9780470128817

More Books

Students also viewed these Accounting questions

Question

Able to describe variations in rewards practices.

Answered: 1 week ago