Question

At the beginning of the year, Lambert Motors issued the three notes described below. Interest is paid at year-end. (FV of $1. PV of $1. FVA of $1. PVA of $1. FVAD of $1 and PVAD of $1) (Use appropriate factor(s) from the tables provided.) 1. The company issued a two-year, 10%, $800,000 note in exchange for a tract of land. The current market rate of interest is 10%. 2. Lambert acquired some office equipment with a fair value of $190,909 by issuing a one-year, $200,000 note. The stated interest on the note is 5%. The current market rate of interest is 10%, 3. The company purchased a building by issuing a five-year installment note. The note is to be repaid in equal installments of $1 million per year beginning one year hence. The current market rate of interest is 10%. as Required: Prepare the journal entries to record each of the three transactions and the interest expense at the end of the first year for each. (1f no entry is required for a transaction/event, select "No journal entry required" in the first account field. Do not round intermediate calculations. Enter your answers in whole dollars.) View transaction list Journal entry worksheet < A B с D E F Record the purchase of land in Situation 1. Note: Enter debits before credits Transaction General Journal Debit Credit

Answer 1

Answer:

Journal Entries
S.No	Account Titles and Explanation	Debit ($)	Credit ($)
1)	Land A/c Dr	800,000
	To Notes Payable A/c		800,000
	Interest Expenses A/c Dr (800,000 * 10%)	80,000
	To Cash A/c		80,000
2)	Office Equipment A/c Dr	190,909
	Discount on Notes Payable A/c Dr	9,091
	To Notes Payable A/c		200,000
	Interest Expenses A/c Dr	19,091
	Discount on Notes Payable A/c		9,091
	To Cash A/c (200,000 * 10%)		10,000
	Notes Payable A/c Dr	200,000
	To Cash A/c		200,000
3)	Buildings A/c Dr (3.7908 * 1,000,000 )	3,790,800
	To Notes Payable A/c		3,790,800
	Interest Expense A/c Dr	379,100
	Notes Payable A/c Dr (0.6209 * 1,000,000)	620,900
	To Cash A/c		1,000,000

Note:

Present Value of ordinary annuity @ 9% for 5 years is 3.7908

Present Value Rate per Period @ 9% for 5 years is 0.6209