(Note Transactions at Unrealistic Interest Rates) On July 1, 2020, Taylor Inc. made two sales.1. It sold land having a fair market value of $500,000 in exchange for a 4-year, zero-interest-bearing promissory note in the face amount of $732,053.70. The land is carried on Taylor’s books at a cost of $375,000.2. It rendered services in exchange for a 4%, 8-year promissory note having a face value of $400,000 (interest payable annually).Taylor Inc. recently had to pay 7% interest for money that it borrowed from British National Bank. The customers in these two transactions have credit ratings that require them to borrow money at 10% interest.InstructionsRecord the two journal entries that should be recorded by Taylor Inc. for the sales transactions above that took place on July 1, 2020.
(Note Transactions at Unrealistic Interest Rates) On July 1, 2020, Taylor Inc. made two sales.
1. It sold land having a fair market value of $500,000 in exchange for a 4-year, zero-interest-bearing promissory note in the face amount of $732,053.70. The land is carried on Taylor’s books at a cost of $375,000.
2. It rendered services in exchange for a 4%, 8-year promissory note having a face value of $400,000 (interest payable annually).
Taylor Inc. recently had to pay 7% interest for money that it borrowed from British National Bank. The customers in these two transactions have credit ratings that require them to borrow money at 10% interest.
Instructions
Record the two
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