On January 1, 2020, Sarasota Co. borrowed and received $507,000 from a major customer evidenced by...

On January 1, 2020, Sarasota Co. borrowed and received $507,000 from a major customer evidenced by a zero-interest-bearing note due in 4 years. As consideration for the zero-interest-bearing feature, Sarasota agrees to supply the customer’s inventory needs for the loan period at lower than the market price. The appropriate rate at which to impute interest is 9%.

(a)		Prepare the journal entry to record the initial transaction on January 1, 2020.
(b)		Prepare the journal entry to record any adjusting entries needed at December 31, 2020. Assume that the sales of Sarasota’s product to this customer occur evenly over the 4-year period.

(Round present value factor calculations to 5 decimal places, e.g. 1.25124 and the final answer to 0 decimal places e.g. 58,971. 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.)

No.

Date

Account Titles and Explanation

Debit

Credit

(a)

(b)



		(To record Interest Expense)

Solutions

Expert Solution

No.	Date	Account Titles and Explanation	Debit	Credit
(a)	Jan 1, 2020	Cash	$ 507,000
		Notes Payable		$ 507,000
		[To record borrowed cash from a major customer]

(b)	Dec 31, 2020	Interest Expense [507,000 x 9%]	$ 45,630
		Sales Revenue		$ 45,630
		[To record Interest expense]

ekkarill92 answered 1 year ago

Next > < Previous

Related Solutions

On January 1, 2020, Ayayai Co. borrowed and received $465,000from a major customer evidenced by...

On January 1, 2020, Ayayai Co. borrowed and received $465,000 from a major customer evidenced by a zero-interest-bearing note due in 5 years. As consideration for the zero-interest-bearing feature, Ayayai agrees to supply the customer’s inventory needs for the loan period at lower than the market price. The appropriate rate at which to impute interest is 10%.(a)Prepare the journal entry to record the initial transaction on January 1, 2020.(b)Prepare the journal entry to record any adjusting entries needed at December...

On January 1, 2020, Sarasota Company purchased $432,000 worth of 8% bonds of Aguirre Co. for...

On January 1, 2020, Sarasota Company purchased $432,000 worth of 8% bonds of Aguirre Co. for $398,642. The bonds were purchased to yield 10% interest. Interest is payable semi-annually, on July 1 and January 1. The bonds mature on January 1, 2025. Sarasota Company uses the effective interest method to amortize the discount or premium. On January 1, 2022, to meet its liquidity needs, Sarasota Company sold the bonds for $400,384, after receiving interest. Prepare the journal entry to record...

On January 1, 2020, Pharoah Co. enters into a contract to sell a customer a wiring...

On January 1, 2020, Pharoah Co. enters into a contract to sell a customer a wiring base and shelving unit that sits on the base in exchange for $3,100. The contract requires delivery of the base first but states that payment for the base will not be made until the shelving unit is delivered. Pharoah identifies two performance obligations and allocates $1,085 of the transaction price to the wiring base and the remainder to the shelving unit. The cost of...

On September 1, 2020, Betty DeRose, Inc. received $45,000 cash from a customer as payment for...

On September 1, 2020, Betty DeRose, Inc. received $45,000 cash from a customer as payment for services to be performed over the next 24 months. Betty DeRose, Inc. received $45,000 cash from another customer on May 31, 2021 as payment for services to be performed over the next 18 months. Calculate the total amount of unearned revenue that would appear in Betty DeRose, Inc's December 31, 2021 balance sheet.

On January 1, 2020, ABC Company borrowed $200,000 from the bank. The loan is a 10-year...

On January 1, 2020, ABC Company borrowed $200,000 from the bank. The loan is a 10-year note payable that requires semi-annual payments of $24,000 every June 30 and December 31, beginning June 30, 2020. Assume the loan has a 20% interest rate, compounded semi-annually. Calculate the amount of the note payable at December 31, 2020 that would be classified as a long-term liability.

On January 1, Year 1, Beatie Co. borrowed $240,000 cash from Central Bank by issuing a...

On January 1, Year 1, Beatie Co. borrowed $240,000 cash from Central Bank by issuing a five-year, 6 percent note. The principal and interest are to be paid by making annual payments in the amount of $56,975. Payments are to be made December 31 of each year, beginning December 31, Year 1. a) Required Prepare an amortization schedule for the interest and principal payments for the five-year period.

On January 1, Year 1, Beatie Co. borrowed $220,000 cash from Central Bank by issuing a...

On January 1, Year 1, Beatie Co. borrowed $220,000 cash from Central Bank by issuing a five-year, 7 percent note. The principal and interest are to be paid by making annual payments in the amount of $53,656. Payments are to be made December 31 of each year, beginning December 31, Year 1. RequiredPrepare an amortization schedule for the interest and principal payments for the five-year period. (Round your answers to the nearest dollar amount.)

On January 1, Year 1, Brown Co. borrowed cash from First Bank by issuing a $64,500...

On January 1, Year 1, Brown Co. borrowed cash from First Bank by issuing a $64,500 face value, four-year term note that had an 9 percent annual interest rate. The note is to be repaid by making annual cash payments of $19,909 that include both interest and principal on December 31 of each year. Brown used the proceeds from the loan to purchase land that generated rental revenues of $34,185 cash per year. c.Prepare an income statement, a balance sheet,...

1. On October 2,20x4, Duck corporation borrowed 150,000 British pounds from a London bank, evidenced by...

1. On October 2,20x4, Duck corporation borrowed 150,000 British pounds from a London bank, evidenced by an interest-bearing note payable due in one year. the note is payable in pounds. Exchange rates for pounds are: October 2,20x4 $1.60; December 31,20x4 $1.62; October 2,20x5 1.56. What is the final amount of the loan payable that Duck showed on its books, in dollars, just before it repaid the loan? 2. Operating income and tax rates for C.J Company's first three years of...

On January 1, 2020, Sarasota Company purchased 10% bonds having a maturity value of $380,000, for...

On January 1, 2020, Sarasota Company purchased 10% bonds having a maturity value of $380,000, for $410,343.38. The bonds provide the bondholders with a 8% yield. They are dated January 1, 2020, and mature January 1, 2025, with interest received on January 1 of each year. Sarasota Company uses the effective-interest method to allocate unamortized discount or premium. The bonds are classified in the held-to-maturity category. Prepare the journal entry at the date of the bond purchase.Prepare a bond amortization...

Subjects