Question

URCES reises 27-01 a 7-02 7-05 7-03 Practice Exercise 7-04 On December 31, 2017, Crane Co. sold equipment to Larkspur, Inc. Crane Co. agreed to accept a $470,000 zero-interest- bearing note due December 31, 2019, as payment in full. Larkspur, Inc. Incorporated in 2017 and had very little credit history at the time of the transaction with Crane. Therefore, at that time, Larkspur typically borrowed funds at a rate of 10%. Crane has a long and positive credit history. Therefore, Crane has various lines of credit at 6%. Prepare the journal entry to record the transaction of December 31, 2017, for Crane Co. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter for the amounts. Round present value factor calculations to 5 decimal places, e.g. 1.25124.) by Study Account Titles and Explanation Debit Credit SHOW LIST OF ACCOUNTS LINK TO TEXT LINK TO TEXT LINK TO TEXT Assuming Crane Co.'s fiscal year-end is December 31, prepare the journal entry for December 31, 2018. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No Entry for the account titles and enter for the amounts.) Account Tities and Explanation Debit Credit Sh ba Ind fir pnera SHOW LIST OF ACCOUNTS

Answer 1

Value of Zero rated note due on 31.12.2019	470,000
Credit percentage for Crane	6%
Issue date of note	31-Dec-17
Time period for maturity (years)	2
Fair Value of the note	418,298
Unamortised Expenses	51,702
Expense for each year	25,851
Interest income for Year 1 on 418,298 @ 6%	25,098
Outstanding note at Year 1 end	443,396
Interest income for Year 2 on 443,396 @ 6%	26,604
Outstanding note at Year 2 end	470,000

	Journal
	In the books of Crane
Date	Particulars	Dr/Cr.	Dr ($)	Cr ($)
31-Dec-17	Zero Interest bearing note	Dr	418,298
	Unamortised Expense A/c	Dr	51,702
	To Sale of Equipment A/c	Cr		470,000
	(Being equipment sold against zero rated note, booked at fair value)
Date	Particulars	Dr/Cr.	Dr ($)	Cr ($)
31-Dec-18	Zero Interest bearing note	Dr	25,098
	To Interest A/c	Cr		25,098
	(Being Interest @ 6% charged)
31-Dec-18	Finance Cost A/c	Dr	25,851
	To Unamortised Expense A/c	Cr		25,851
	(Being unamortised expense amortised for 1 year on straight line)
Date	Particulars	Dr/Cr.	Dr ($)	Cr ($)
31-Dec-19	Zero Interest bearing note	Dr	26,604
	To Interest A/c	Cr		26,604
	(Being Interest @ 6% charged)
31-Dec-19	Finance Cost A/c	Dr	25,851
	To Unamortised Expense A/c	Cr		25,851
	(Being unamortised expense amortised for 1 year on straight line)
31-Dec-19	Bank A/c	Dr	470,000
	To Zero Interest bearing note	Cr		470,000
	(Being amount realized from Note)