Question

On January 1, 2020, Metlock Co. borrowed and received $465,000 from a major customer evidenced by a zero-interest-bearing note due in 5 years. As consideration for the zero-interest-bearing feature, Metlock agrees to supply the customer's inventory needs for the loan period at lower than the market price. The appropriate rate at which to impute interest is 10%. (a) Prepare the journal entry to record the initial transaction on January 1, 2020. (b) Prepare the journal entry to record any adjusting entries needed at December 31, 2020. Assume that the sales of Metlock's product to this customer occur evenly over the 5-year period. (Round present value factor calculations to 5 decimal places, .9. 1.25124 and the final answer to o decimal places e.. 58,971. If no entry is required, select "No Entry for the account titles and enter o for the amounts. Credit account titles are automatically indented when amount is entered. Do not indent manually.) No. Date Account Titles and Explanation Debit Credit (a) (b) (To record Interest Expense)

Answer 1

Solution Gredet Account tHtHe and Explanation Delit Date 465000 Cash 1-Jan 1a Dfscount on Noter payable স6२न2 465000 Notes pay able Unearned SAles revenve 176272 notes payalte ånd unearned sales revenue] re Cerd | To Interest experse R8877-78 31 Dec 20 Discount on Notes payable 28872.78 S To record Interest experse] 35254 uneanned sales ruvenue 31 Dec 20 35254 sales Revenue [To record sales revenve]

465000 - LPresent valwe of 465000 where n=5 e 1=10%] Discount on Notes payable 465000-[465000 x present valve joctor @10%n=5) 465000 – [ 46500D X O.62092] 465000 268728 176272 [ 465000 X 0-62093] X 10% Interest experse 28872.78 35254 vnearnd sales revenve 176272 + 5