Question
On January 1, Blue Spruce Corp. lent $53,000 to Larkspur, Inc., accepting Larkspurs $70,543, three-year, zero-interest-bearing note. The implied interest is 10%. Prepare Blues journal
On January 1, Blue Spruce Corp. lent $53,000 to Larkspur, Inc., accepting Larkspurs $70,543, three-year, zero-interest-bearing note. The implied interest is 10%. Prepare Blues journal entries for the initial transaction, recognition of interest each year assuming the use of the effective interest method, and the collection of $70,543 at maturity.
Account Titles and Explanation | Debit | Credit |
---|---|---|
enter an account title to record initial transaction | enter a debit amount | enter a credit amount |
enter an account title to record initial transaction | enter a debit amount | enter a credit amount |
(To record initial transaction) | ||
enter an account title to record interest income in the first year | enter a debit amount | enter a credit amount |
enter an account title to record interest income in the first year | enter a debit amount | enter a credit amount |
(To record interest income in the first year) | ||
enter an account title to record interest income in the second year | enter a debit amount | enter a credit amount |
enter an account title to record interest income in the second year | enter a debit amount | enter a credit amount |
(To record interest income in the second year) | ||
enter an account title to record interest income in the third year | enter a debit amount | enter a credit amount |
enter an account title to record interest income in the third year | enter a debit amount | enter a credit amount |
(To record interest income in the third year) | ||
enter an account title to record collection at maturity | enter a debit amount | enter a credit amount |
enter an account title to record collection at maturity | enter a debit amount | enter a credit amount |
(To record collection at maturity) |
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started