Question
Prepare all the journal entries necessary to record the following transactions for Orange Computer Company, which has a March 31 fiscal year end. Orange Computer
Prepare all the journal entries necessary to record the following transactions for Orange Computer Company, which has a March 31 fiscal year end.
Orange Computer designs and manufactures laptop computers. Orange is buying a competitors laptop computer factory. Orange will pay $10,000,000 cash and sign a note to pay $2,000,000 every six months for 10 years. The note is secured by the factory assets. Market interest rates for 10-year debt is 4.5%. Orange hired an appraiser to value the factory components. The building is appraised at $26,000,000, the land at $14,000,000 and equipment at $10,000,000. Building and equipment have useful lives of 40 and 5 years, respectively, and residual values of $4,000,000 and $300,000, respectively. Orange uses straight-line depreciation for buildings and equipment.
12/1/18: Transaction closed. Prepare journal entries to record purchase.
3/31/19: Fiscal yearend. Prepare all required journal entries.
5/31/19: First $2,000,000 payment. Prepare all required journal entries.
11/30/19: Second $2,000,000 payment. Prepare all required journal entries.
3/31/23: Fiscal yearend. Prepare all required journal entries.
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