Transaction History: Purchased franchise to sell Crispy Cook grills for 10 years. Paid $20,000 cash and...
Transaction History:
Purchased franchise to sell Crispy Cook grills for 10 years. Paid $20,000 cash and signed a 10- year note for $40,000 with 10% annual interest. $4,000 of the principal on the note is to be paid each year on January 1. The first payment will be on January 1, 20X2. Interest is to be paid twice each year, on July 1 and January 1.
How would you record this activity?
Homework Answers
Recording journal entries:
| Date | Account Titles and Explanations | Debit | Credit |
| Jan. 1, 20X2 | Franchise ($20,000 + $40,000) | $60,000 | |
| Cash | $20,000 | ||
| Notes Payable | $40,000 | ||
| (To record the purchase of franchise by cash and issuing 4% note) | |||
| Jan. 1, 20X2 | Note Payable | $4,000 | |
| Cash | $4,000 | ||
| (To record payment first principal amount) | |||
| July. 1, 20X2 | Interest Expense ($40,000 - $4,000 = $36,000*10/100*6/12 months) | $2,000 | |
| Cash | $2,000 | ||
| (To record the payment of 6 months interest expense) | |||
| Jan. 1, 20X3 | Interest Expense ($40,000 - $4,000 = $36,000*10/100*6/12 months) | $2,000 | |
| Cash | $2,000 | ||
| (To record the payment of 6 months interest expense) |
Add Answer to:
Transaction History:
Purchased franchise to sell Crispy Cook grills for 10 years.
Paid $20,000 cash and...
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