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On January 1, 2019, Crouser Company sold land to Chad Company, accepting a 2-year, $150,000, non-interest-bearing...

On January 1, 2019, Crouser Company sold land to Chad Company, accepting a 2-year, $150,000, non-interest-bearing note due January 1, 2021. The fair value of the land was $126,252.00 on the date of sale. The company purchased the land for $105,000 on January 1, 2013.

Required:

Prepare all the journal entries on Crouser’s books for January 1, 2019, through January 1, 2021, in regard to the Chad note.
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Answer #1
Date Account Titles and Explanation Debit Credit
January 1, 2019 Note receivable $150,000
Discount on note receivable (150000-126,252) $23,748
Land 105000
  Gain on sale of land (126,252.00-105000) 21252
January 1, 2020 Discount on note receivable (126252*9%) 11363
  Interest income 11363
January 1, 2021 Discount on note receivable (126252+11363)*9%) 12385
  Interest income 12385

Interest rate is ascertained as (150000/126252)^2 - 1 = 0.9 = 9%

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