Question

On January 1, 2014, Fishbone Corporation sold equipment to Lost Company that cost $250,000 and that had accumulated depreciation of $100,000 on the date of sale. Fishbone received as consideration a 5% interest-bearing note requiring payments of $80,000 annually for 3 years. The first note payment is to be made on January 1, 2014. The prevailing rate of interest for a note of this type on January 1, 2014, was 5%.

Record the 1/1/14 transaction for Fishbone Corporation and all necessary entries from 2014-2016.

Record the 1/1/14 transaction for Lost Company and all necessary entries from 2014-2016.

Answer 1

On january 1,2014 fishbone corporation sold equipment to lost , company that cost 250000 and that had accumulated depreciation of 100000 onthe date of sale .
on January 1, 2014 Fishbone corporation sold equipment to lost company that cost $250,000 and that had accumulated degreciation of $100.000 on the date of sale. The Journal entries for F corporation are provided below Debit credit Date Account tite and explanation Jan 1 2014 Notes receivable 228000 Accumulated depreciation 100,000 250,000 "78000 80000 80000 Equiment Gain on sale of equipment 1 (to record sale of equipment of notes Payable) Jan 1 2014 cash noles receivable (lo record cash received a ganist notes receivable) son 1 2015 Cash roles receivable Interest revenue (1600CG * 50 (to record cash received against roles receivable) Jani &016 cash pooles receivable interest revenue (80000 * 5) to record cash received Sainst notes receivables 80000 72000 8000 80000 76000 4000

& the Journal entries for a company are provided below. Date Jan 1 Debit credit 228000 22.8000 2014 Jan 1 2014 80000 80000 San 2015 Account little and explanation. Equipment notes Payable (to record purchase of equipment in exchanges of Croles pavable) rootes parable Cash (to record cash paid against notes payable) interest expenses (160o0o* 5.1) woles payable (80000 -8000) cash (to record cash Raid against notes Payable) interest expense (82000*54.) notes Payable (80000 -4000) cash (to record cash paid agains) notes payable 8000 79000 80000 Pan 1 2016 4000 76000 80000 The present value of annual payments te, the sale Poice of equipment is calculated below. Present Value = Payment on any 1, 2014+ (annual payment puAF (2yR57) • 80000 + (80000*1-85) 2 80000 +148000 - 228000