Answer:
Explanation:
On January 1, 2019, Crouser Company sold the 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 $123,966.90 on the date of sale.
The company purchased the land for $120,000 on January 1, 2013. Prepare all the journal entries on Crouser's books for January 1, 2013, through January 1, 2015, in regard to the Chad note
<u>On the date of Sale - Jan 1, 2019</u>
Debit Notes Receivable........123,966.90
Credit Land.....................................................123,966.9
Being sale of land to Chad Company, accepting a 2-year, $150,000, non-interest-bearing note due January 1, 2021
<em>(Note that the short fall between the value of the land and the note receivable represents a discounting of the note receivable to Present Value, and this discounted amount of 26033.1 will be unwound in 2 years)</em>
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<u>On 31 Dec 2019</u>
Debit. Notes Receivable.........................12,396
Credit. Interest Income......(10% x 123,966.9)...12,396
Being the unwinding of the interest on Notes Receivable against land sale
On 31 Dec 2020
Debit. Notes Receivable.........................13,636.29
Credit. Interest Income......(10% x (123,966.9+12,396))...13,636.29
Being the unwinding of the interest on Notes Receivable against land sale
On Jan 1 2021
Debit Cash...........................150,000
Credit Note Receivable....................150,000
