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On January 1, 2020, Jet Air Inc. contracted with Systems Plus Inc. to manufacture heavy equipment. Jet Air Inc. issued a $75,000 note to Systems Plus Inc. in exchange for the equipment that required 5% interest payments annually over 3 years on December 31 of each year. Although the fair value of the customized heavy equipment was not reasonably determinable, it was determined that 10% was a reasonable rate of interest for such a transaction. Provide journal entries to be made by Jet Air Inc. at each of the following dates. a. January 1, 2020 ---Date of note issuance. b. December 31, 2020 ---Date of interest payment. c. December 31, 2021 ---Date of interest payment. d. December 31, 2022 ---Date of interest payment. e. December 31, 2022 ---Date of note payment at maturity. • Note: List multiple debits or credits (when applicable) in alphabetical order. • Note: Round your answer to the nearest whole dollar. • Note: Adjust interest expense in 2022 for any net rounding differences. Date a. Jan. 1, 2020 Discount on Note Payable Equipment Note Payable b. Dec. 31, 2020 Interest Expense Cash Discount on Note Payable c. Dec. 31, 2021 Interest Expense Account Name Cash Discount on Note Payable d. Dec. 31, 2022 Interest Expense Cash Discount on Note Payable e. Dec. 31, 2022 Note Payable Cash ♦ ✓ ♦ ✓ → ✓ ♦ ✓ ♦ ✓ + ✓ ♦ ✓ ♦ ♦ → + + ✓ ✓ ✓ ✓ Dr. 18,652 X 56,348 x 0✔ 0 x 0✔ 0✓ 0 x 0✓ 0✔ 0 x 0✔ 0 ✓ 75,000 ✓ 0✔ Cr. 0✔ 0✔ 75,000 ✓ 0✓ 3,750 ✓ 0 x 0 ✓ 3,750✔ 0 x 0 ✓ 3,750✔ 0 x 0✔ 75,000 ✓

On January 1, 2020, Jet Air Inc. contracted with Systems Plus Inc. to manufacture heavy equipment. Jet Air Inc. issued a $75,000 note to Systems Plus Inc. in exchange for the equipment that required 5% interest payments annually over 3 years on December 31 of each year. Although the fair value of the customized heavy equipment was not reasonably determinable, it was determined that 10% was a reasonable rate of interest for such a transaction. Provide journal entries to be made by Jet Air Inc. at each of the following dates. a. January 1, 2020 ---Date of note issuance. b. December 31, 2020 ---Date of interest payment. c. December 31, 2021 ---Date of interest payment. d. December 31, 2022 ---Date of interest payment. e. December 31, 2022 ---Date of note payment at maturity. • Note: List multiple debits or credits (when applicable) in alphabetical order. • Note: Round your answer to the nearest whole dollar. • Note: Adjust interest expense in 2022 for any net rounding differences. Date a. Jan. 1, 2020 Discount on Note Payable Equipment Note Payable b. Dec. 31, 2020 Interest Expense Cash Discount on Note Payable c. Dec. 31, 2021 Interest Expense Account Name Cash Discount on Note Payable d. Dec. 31, 2022 Interest Expense Cash Discount on Note Payable e. Dec. 31, 2022 Note Payable Cash ♦ ✓ ♦ ✓ → ✓ ♦ ✓ ♦ ✓ + ✓ ♦ ✓ ♦ ♦ → + + ✓ ✓ ✓ ✓ Dr. 18,652 X 56,348 x 0✔ 0 x 0✔ 0✓ 0 x 0✓ 0✔ 0 x 0✔ 0 ✓ 75,000 ✓ 0✔ Cr. 0✔ 0✔ 75,000 ✓ 0✓ 3,750 ✓ 0 x 0 ✓ 3,750✔ 0 x 0 ✓ 3,750✔ 0 x 0✔ 75,000 ✓

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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On January 1, 2020, Jet Air Inc. contracted with Systems Plus Inc. to manufacture heavy equipment. Jet Air Inc. issued a $75,000 note to Systems Plus Inc. in exchange for the equipment that required 5% interest payments annually over 3 years on December 31 of each year. Although the fair value of the customized heavy equipment was not reasonably determinable, it was determined that 10% was a reasonable rate of interest for such a transaction. Provide journal entries to be made by Jet Air Inc. at each of the following dates. a. January 1, 2020 ---Date of note issuance. b. December 31, 2020 ---Date of interest payment. c. December 31, 2021 ---Date of interest payment. d. December 31, 2022 ---Date of interest payment. e. December 31, 2022 ---Date of note payment at maturity. • Note: List multiple debits or credits (when applicable) in alphabetical order. • Note: Round your answer to the nearest whole dollar. • Note: Adjust interest expense in 2022 for any net rounding differences. Date a. Jan. 1, 2020 Discount on Note Payable Equipment Note Payable b. Dec. 31, 2020 Interest Expense Cash Discount on Note Payable c. Dec. 31, 2021 Interest Expense Account Name Cash Discount on Note Payable d. Dec. 31, 2022 Interest Expense Cash Discount on Note Payable e. Dec. 31, 2022 Note Payable Cashi ♦ ✓ ◆ ✓ ♦ ✓ + ✓ + ✓ ◆ ◆ ♦ ♦ ✓ ✓ ✓ ✓ Dr. 18,652 x 56,348 x 0✔ 0 x 0✔ 0✔ 0 x 0✓ 0✔ 0 x 0✔ 0✓ 75,000 ✓ 0✔ Cr. 0 ✓ 0✔ 75,000 ✓ 0✔ 3,750 ✓ 0 x 0✔ 3,750 ✓ 0 x 0 ✓ 3,750✔ 0 x 0 ✓ 75,000 ✓
Transcribed Image Text:On January 1, 2020, Jet Air Inc. contracted with Systems Plus Inc. to manufacture heavy equipment. Jet Air Inc. issued a $75,000 note to Systems Plus Inc. in exchange for the equipment that required 5% interest payments annually over 3 years on December 31 of each year. Although the fair value of the customized heavy equipment was not reasonably determinable, it was determined that 10% was a reasonable rate of interest for such a transaction. Provide journal entries to be made by Jet Air Inc. at each of the following dates. a. January 1, 2020 ---Date of note issuance. b. December 31, 2020 ---Date of interest payment. c. December 31, 2021 ---Date of interest payment. d. December 31, 2022 ---Date of interest payment. e. December 31, 2022 ---Date of note payment at maturity. • Note: List multiple debits or credits (when applicable) in alphabetical order. • Note: Round your answer to the nearest whole dollar. • Note: Adjust interest expense in 2022 for any net rounding differences. Date a. Jan. 1, 2020 Discount on Note Payable Equipment Note Payable b. Dec. 31, 2020 Interest Expense Cash Discount on Note Payable c. Dec. 31, 2021 Interest Expense Account Name Cash Discount on Note Payable d. Dec. 31, 2022 Interest Expense Cash Discount on Note Payable e. Dec. 31, 2022 Note Payable Cashi ♦ ✓ ◆ ✓ ♦ ✓ + ✓ + ✓ ◆ ◆ ♦ ♦ ✓ ✓ ✓ ✓ Dr. 18,652 x 56,348 x 0✔ 0 x 0✔ 0✔ 0 x 0✓ 0✔ 0 x 0✔ 0✓ 75,000 ✓ 0✔ Cr. 0 ✓ 0✔ 75,000 ✓ 0✔ 3,750 ✓ 0 x 0✔ 3,750 ✓ 0 x 0 ✓ 3,750✔ 0 x 0 ✓ 75,000 ✓
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