1. | It sold land having a fair value of $914,620 in exchange for a 4-year zero-interest-bearing promissory note in the face amount of $1,439,168. The land is carried on Cheyenne's books at a cost of $600,100. | |
2. | It rendered services in exchange for a 3%, 8-year promissory note having a face value of $405,130 (interest payable annually). |
Cheyenne Inc. recently had to pay 8% interest for money that it
borrowed from British National Bank. The customers in these two
transactions have credit ratings that require them to borrow money
at 12% interest.
Record the two journal entries that should be recorded by Cheyenne
Inc. for the sales transactions above that took place on July 1,
2020. (Round present value factor calculations to 5
decimal places, e.g. 1.25124 and final answers to 0 decimal places,
e.g. 5,275. If no entry is required, select "No Entry" for the
account titles and enter 0 for the amounts. Credit account titles
are automatically indented when the amount is entered. Do not
indent manually.)
No. |
Date |
Account Titles and Explanation |
Debit |
Credit |
---|---|---|---|---|
1. |
July 1, 2020 |
enter an account title |
enter a debit amount |
enter a credit amount |
enter an account title |
enter a debit amount |
enter a credit amount |
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enter an account title |
enter a debit amount |
enter a credit amount |
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enter an account title |
enter a debit amount |
enter a credit amount |
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2. |
July 1, 2020 |
enter an account title |
enter a debit amount |
enter a credit amount |
enter an account title |
enter a debit amount |
enter a credit amount |
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enter an account title |
enter a debit amount |
enter a credit amount |
No | Date | Account titles and explanation | Debit | Credit | |||||
1 | July 1,2020 | Note receivable | 914620 | ||||||
Land | 600100 | ||||||||
Gain on sale of land | (914620-600100) | 314520 | |||||||
(Land sold in exchange of note) | |||||||||
2 | July 1,2020 | Note receivable | (Note:1) | 218880 | |||||
Sales revenue | 218880 | ||||||||
(Sales revenue recorded) | |||||||||
Note:1 | |||||||||
Face value of note=$ 405130 | |||||||||
It is received at the time of maturity | |||||||||
Now,let's find the present value of face value of bonds | |||||||||
Discount factor=Interest on money borrowed=8% | |||||||||
Present value of face value of bonds=Face value of the bonds*Discount factor at 8% for the 8th year=405130*0.54027=$ 218880 | |||||||||
I appreciate your ratings | |||||||||
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