Question

Notes Receivable

Instructions

Chart of Accounts

General Journal

Present Value Tables

Instructions

On January 1, 2016, Crouser Company sold land to Chad Company, accepting a 2-year, $150,000, non-interest-bearing note due January 1, 2018. The fair value of the land was $123,966.90 on the date of sale. Crouser purchased the land for $110,000 on January 1, 2010.

Required:

Prepare all the journal entries on Crouser’s books for January 1, 2016, through January 1, 2018, in regard to the Chad note.

Chart of Accounts

CHART OF ACCOUNTS
Crouser Company
General Ledger
ASSETS 111 Cash 121 Accounts Receivable 125 Notes Receivable 141 Inventory 152 Prepaid Insurance 162 Discount on Notes Receivable 171 Land 181 Equipment 189 Accumulated Depreciation LIABILITIES 211 Accounts Payable 231 Salaries Payable 250 Unearned Revenue 261 Income Taxes Payable EQUITY 311 Common Stock 331 Retained Earnings	REVENUE 411 Sales Revenue 431 Interest Income 436 Gain on Sale of Land EXPENSES 500 Cost of Goods Sold 511 Insurance Expense 512 Utilities Expense 521 Salaries Expense 532 Bad Debt Expense 540 Interest Expense 541 Depreciation Expense 559 Miscellaneous Expenses 910 Income Tax Expense

General Journal

Prepare all the journal entries on Crouser’s books for January 1, 2016 and December 31, 2016 in regard to the Chad note. Additional Instructions

PAGE 1

GENERAL JOURNAL

	DATE	ACCOUNT TITLE	POST. REF.	DEBIT	CREDIT
1
2
3
4
5
6

Prepare the journal entry on Crouser’s books for December 31, 2017 in regard to the Chad note. Additional Instructions

PAGE 1

GENERAL JOURNAL

	DATE	ACCOUNT TITLE	POST. REF.	DEBIT	CREDIT
1
2

Prepare the journal entry on Crouser’s books for January 1, 2018 in regard to the Chad note. Additional Instructions

PAGE 1

GENERAL JOURNAL

	DATE	ACCOUNT TITLE	POST. REF.	DEBIT	CREDIT
1
2

Answer 1

Date	Accounts Titles and Explanation	Debit	Credit
January 1, 2016	Notes receivable	$ 150,000
	Discount on notes receivable                ( $ 150,000 (-) $ 123,966.9)		$ 26,033.1
	Land		$ 110,000
	Gain on sale of land              ( $ 123,966.9 (-)$ 110,000 )		$ 13,966.9
	(To record the Sale of Land on exchange of Note )
December 31, 2016	Discount on notes receivable ( $ 123,966.9 x 10% )	$ 12,396.69
	Interest income		$ 12,396.69
	(To record the interest income )
	Workings :
	PV Factor         = Fair value / Issue price         = $ 123,966.90 / $ 150,000         = 0.82645
	Factor Value of 0.82645 for 2 Years from PVF table is 10%
December 31, 2017	Discount on notes receivable ( $ 26,033.1 (-) $ 12,396.69 )	$ 13,636.41
	Interest income		$ 13,636.41
	(To record the interest income )
January 1, 2018	Cash	$ 150,000
	Notes receivable		$ 150,000
	(To record the Cash received )