Suppose that Kilgore, Inc., is the company that accepted the note from Dieland Company in RE14-12. Kilgore had originally purchased the equipment for $18,000, and the equipment has a book value of $14,000 on January 1. Kilgore knows Dieland's incremental borrowing rate of 9%. Prepare the journal entry for Kilgore to record the sale of the equipment on January 1.
In RE14-12, On January 1, Dieland Company issues a $20,000 non-interest-bearing, 5-year note for equipment. Neither the fair value of the note nor the equipment is determinable. Dieland Company's incremental borrowing rate is 9%.
The asset has a useful life of 7 years. Prepare the journal entry for Dieland to record the issuance of the note on January 1.