Question

On July 1, 2020, Coronado Inc. made two sales. 1. It sold land having a fair value of $904,970 in exchange for a 4-year zero-interest-bearing promissory note in the face amount of $1,423,984. The land is carried on Coronado's books at a cost of $596,000. 2. It rendered services in exchange for a 3%, 8-year promissory note having a face value of $409,570 (interest payable annually). Coronado 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 Coronado 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 o for the amounts. Credit account titles are automatically Indented when the amount is entered. Do not indent manually.) Debit Credit No. 1. Date Account Titles and Explanation July 1, 2020 N 142398 1 Land 596000 T Gain on Disposal of Lan 308970 519014 T Discount on Notes Rece 2. July 1, 2020 Notes Receivable 409570 T Service Revenue 333018 Discount on Notes Rece 76552 SHOW LIST OF ACCOUNTS

Answer 1

Journal entries: Credit Debit $1,423,984 AAB 1 No. Date Account Titles and Explanation 2 1 July 1, 2020 Notes receivable Land Gain on disposal of land Discount on notes receivable $596,000 $308,970 $519,014 2 $409,570 July 1, 2020 Notes receivable Service revenue Discount on notes receivable $226,455 $183,115 Working Note for 2nd Journal entry Face value of Note $409,570 PVF @ 12% for 8th year 0.403883228 PVF @ 12% for 8th year Rounded to 5 decimal places) 0.40388 Present value of face value of note $165,417 $12,287 4.967639767| Interest on note PVAF @ 12% for 8 years PVAF @ 12% for 8 years (Rounded to 5 decimal places) Present value of interest on note 4.96764 $61,038

Calculations are shown below: Credit Debit 1423984 AAB 1 No. Date Account Titles and Explanation 21 July 1, 2020 Notes receivable Land Gain on disposal of land Discount on notes receivable 596000 =D2-E3-E5 =D2-904970 72 409570 July 1, 2020 Notes receivable Service revenue Discount on notes receivable =D15+D20 =D7-E8 Working Note for 2nd Journal entry Face value of Note 409570 PVF @ 12% for 8th year I=PV(12%,8,0,-1,0) PVF @ 12% for Sth year (Rounded to 5 decimal places) =ROUND( D13,5) Present value of face value of note =D12*D14 =D12*3% =PV(12%,8,-1,0,0) Interest on note PVAF @ 12% for 8 years PVAF @ 12% for 8 years (Rounded to 5 decimal places) Present value of interest on note =ROUNDD18,5) =D17*D19