Question

On October 1, Bandor Company sold land (that cost $30,000) on credit for $35,000. The buyer issued an 8%, 12-month note for this amount, with the interest to be paid on the maturity date. Required: Prepare journal entries to record the sale of the land and the related year-end adjusting entry.

Answer 1

Answer:

Date     Account Titles                       Debit      Credit

Oct 01   8% Note Receivables         $35,000

                    Land                                               $30,000

                     Gain on sale                                  $5,000

            (To record the sale of the land)

Dec 31   Interest receivable               $700

                    Interest Revenue                             $700

                    (35,000*8%*3/12)

               (To record Interest Revenue on Note for 3 month recognized)