Question

In: Accounting

Marigold Corporation issued a 5-year, $80,000, zero-interest-bearing note to Brown Company on January 1, 2020, and received cash of $45,394.

Brief Exercise 14-11

Marigold Corporation issued a 5-year, $80,000, zero-interest-bearing note to Brown Company on January 1, 2020, and received cash of $45,394. The implicit interest rate is 12%.

Prepare Marigold’s journal entries for (a) the January 1 issuance and (b) the December 31 recognition of interest. (Round answers to 0 decimal places, e.g. 38,548. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts. Credit account titles are automatically indented when amount is entered. Do not indent manually.)

A. DR CR

DR CR

B. DR CR

DR CR

Expert Solution

A)

Cash A/c DR 45,394

Discount on note payable A/c DR 34,606

To Note payable A/c CR 80,000

(Being note payable issued )

B)

Interest expense A/c DR 5,447

To Discount on note payable A/c CR 5,447

(Interest expense recorded)

Interest expense is calculated by the following

=Cash received x implicit interest rate

= 45,394 x 12%

=5,447.28

ekkarill92 answered 2 years ago

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