Cool Globe Inc. entered into two transactions, as follows: 1. Purchased equipment paying $20,000 at the date of purchase and signing a noninterest-bearing note requiring the balance to be paid in four annual installments of $20,000 on the anniversary date of the contract. Based on Cool Globe's 12% borrowing rate for such transactions, the implicit interest cost is $19,253. 2. Purchased a tract of land in exchange for $10,000 cash that was paid immediately and signed a noninterest-bearing note requiring five $10,000 annual payments. The first annual payment of the note is due in one year. The fair value of the land is $46,000. Required: Prepare the journal entries for these transactions. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)

Cool Globe Inc. entered into two transactions, as follows: 1. Purchased equipment paying $20,000 at the date of purchase and signing a noninterest-bearing note requiring the balance to be paid in four annual installments of $20,000 on the anniversary date of the contract. Based on Cool Globe's 12% borrowing rate for such transactions, the implicit interest cost is $19,253. 2. Purchased a tract of land in exchange for $10,000 cash that was paid immediately and signed a noninterest-bearing note requiring five $10,000 annual payments. The first annual payment of the note is due in one year. The fair value of the land is $46,000. Required: Prepare the journal entries for these transactions. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)

Financial And Managerial Accounting

15th Edition

ISBN:9781337902663

Author:WARREN, Carl S.

Publisher:WARREN, Carl S.

Chapter10: Liabilities: Current, Installment Notes, And Contingencies

Section: Chapter Questions

Problem 6E: Fixed asset purchases with note On June 30, Collins Management Company purchased land for 400,000...

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