Spath Company borrows $75,000 by issuing a 4-year, noninterest- bearing note to a customer on January 1, 2016. In addition, Spath agrees to sell inventory to the customer at reduced prices over a 5-year period. Spaths incremental borrowing rate is 12%. The customer agrees to purchase an equal amount of inventory each year over the 5-year period so that a straight-line method of revenue recognition is appropriate.

!!!!!!!!!!!!!!!!! you have to use present value table !!!!!!!!!!!!!!!!!!!

Required:

Prepare the journal entries on Spaths books for 2016 and 2017.

CHART OF ACCOUNTS

Spath Company

General Ledger

	ASSETS
111	Cash
121	Accounts Receivable
141	Inventory
152	Prepaid Insurance
181	Equipment
198	Accumulated Depreciation

	LIABILITIES
211	Accounts Payable
231	Salaries Payable
250	Unearned Revenue
251	Notes Payable
252	Discount on Notes Payable
261	Income Taxes Payable

	EQUITY
311	Common Stock
331	Retained Earnings

	REVENUE
411	Sales Revenue

	EXPENSES
500	Cost of Goods Sold
511	Insurance Expense
512	Utilities Expense
521	Salaries Expense
532	Bad Debt Expense
540	Interest Expense
541	Depreciation Expense
559	Miscellaneous Expenses
910	Income Tax Expense

Prepare the journal entries on Spaths books for 2016 and December 31, 2017. Additional Instructions

Please fill out both charts for PAGE 2016 and PAGE 2017. There is supposed to be two charts. First chart (2016) with 8 entries and the second chart (2017) with 4 entries.

GENERAL JOURNAL

	DATE	ACCOUNT TITLE	POST. REF.	DEBIT	CREDIT
1
2
3
4
5
6
7
8