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Intermediate Accounting: Reporting...

3rd Edition
James M. Wahlen + 2 others
ISBN: 9781337788281

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Intermediate Accounting: Reporting...

3rd Edition
James M. Wahlen + 2 others
ISBN: 9781337788281
Textbook Problem
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On January 1, 2019, Boater Company issues a $20,000 non-interest-bearing, 5-year note for equipment. Neither the fair value of the note nor the equipment is determinable. Boater’s incremental borrowing rate is 9%. The asset has a useful life of 7 years. Prepare the journal entry for Boater to record the issuance of the note on January 1.

To determine

Prepare journal entry to record the issuance of the note on January 1.

Explanation

Notes payable:

Notes payable is a written promise to make payment for specific sum at a certain future date that includes component of interest.

Prepare journal entry to record the issuance of note payable.

DateAccount titles and ExplanationDebitCredit
January 1Equipment (1)$12,998.62  
 Discount on notes payable$7,001.38  
      Notes payable $20,000
 (To record issuance of notes payable)  

Table (1)

Working note:

(1)Calculate equipment...

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