Doid Acrobats lent $16,529 to Donaldson, Inc., accepting Donaldson's 2-year, $20,000, zero interest bearing note. The implied interest rate is 10%Prepare Dold's journal entries for the initial transaction.Notes Receivable20.000Cash20,000

Answered: Dold Acrobats lent $16,529 to…

Principles of Accounting Volume 1

19th Edition

ISBN:9781947172685

Author:OpenStax

Publisher:OpenStax

Chapter12: Current Liabilities

Section: Chapter Questions

Problem 16Q: Jain Enterprises honors a short-term note payable. Principal on the note is $425,000, with an annual...

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Doid Acrobats lent $16,529 to Donaldson, Inc., accepting Donaldson's 2-year, $20,000, zero interest bearing note. The implied interest rate is 10%
Prepare Dold's journal entries for the initial transaction.
Notes Receivable
20.000
Cash
20,000

Expert Solution

Step 1

Notes Receivables: The notes receivable is an account on the balance sheet usually under the current assets section if its life is less than a year. Specifically, a note receivable is a written promise to receive money at a future date. The money is usually made up of interest and principal.

Zero interest-bearing note: A non-interest-bearing note is a note or bond with no stated interest rate on its face. Contrary to the name, noninterest-bearing notes do actually pay interest. The interest is implied in the face value of the note.

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