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In: Accounting
On 12-31-19, J sold some inventory to T. J accepted from T a $4,000,000, 2% note...
On 12-31-19, J sold some inventory to T. J accepted from T a $4,000,000, 2% note receivable. J will collect interest on the note every 12-31 starting 12-31-20. J will collect the note principle in full on 12-31-21. At the time J sold the inventory, the market rate on similar notes was 3%. The cost of the inventory J sold was $500,000. Prepare the entries J should make on 12-31-19, 12-31-20, and 12-31-21
Solutions
Expert Solution
| Solution : | ||||
| JOURNAL ENTRIES IN THE BOOKS OF J | ||||
| Journal Entries | ||||
| Sr. No. | Date | Account Title | Debit | Credit |
| 1 | 12-31-19 | Note Receivable | $ 4,000,000 | |
| Sales Revenue | $ 4,000,000 | |||
| 2 | 12-31-19 | Cost of Goods Sold | $ 500,000 | |
| Merchandise Inventory | $ 500,000 | |||
| 3 | 12-31-20 | Cash ($ 4,000,000 X 2%) | $ 80,000 | |
| Interest Revenue | $ 80,000 | |||
| 4 | 12-31-21 | Cash | $ 4,080,000 | |
| Interest Revenue | $ 80,000 | |||
| Note Receivable | $ 4,000,000 | |||
ekkarill92 answered 2 years agoRelated Solutions
On 12-31-19, J sold some inventory to T. J accepted from T a $4,000,000, 2% note...
On 12-31-19, J sold some inventory to T. J accepted from T a
$4,000,000, 2% note receivable. J will collect interest on the note
every 12-31 starting 12-31-20. J will collect the note principle in
full on 12-31-21. At the time J sold the inventory, the market rate
on similar notes was 3%. The cost of the inventory J sold was
$500,000. Prepare the entries J should make on 12-31-19, 12-31-20,
and 12-31-21.
20. XYZ Merchandising uses a periodic inventory system. The balance in the inventory account on 12/31/19...
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Debit Notes Receivable $5,600; debit Interest Receivable $168;
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