Question
In: Accounting
On June 30, 2021, the Esquire Company sold merchandise to a customer and accepted a noninterest-bearing...
On June 30, 2021, the Esquire Company sold merchandise to a customer and accepted a noninterest-bearing note in exchange. The note requires payment of $28,000 on March 31, 2022. The fair value of the merchandise exchanged is $26,530. Esquire views the financing component of this contract as significant.
Required:
1. Prepare journal entries to record the sale of merchandise (omit any entry that might be required for the cost of the goods sold), any December 31, 2021 interest accrual, and the March 31, 2022 collection.
2. What is the effective interest rate on the note?
Solutions
Expert Solution
| Answer | |||
|
1) |
|||
| Date | Account title | Debit | credit |
| June 30 2021 | Note receivable | $ 28,000 | |
| Discount on note receivable | $ 1,470 | ||
| sales revenue | $ 26,530 | ||
| December 31 2021 | Discount on note receivable | $ 980 | |
| Interest revenue (1470*6/9 ) | $ 980 | ||
| march 31 2022 | Discount on note receivable | $ 490 | |
| Interest revenue (1470-980) | $ 490 | ||
| March 31 2022 | cash | $ 28,000 | |
| Note receivable | $ 28,000 | ||
| 2)Discount amount = Face value of note *r *n/12 | |||
| 1470 = 28000* r *9/12 | |||
| 1470/28000 = r*9/12 | |||
| .0525*12/9 = r | |||
| r = .07 or 7% | |||
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the goods sold), the December 31, 2021 interest accrual, and the...
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On June 30, 2021, the Esquire Company sold some merchandise to a
customer for $32,000. In payment, Esquire agreed to accept a 5%
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customer and accepted a noninterest-bearing note in exchange. The
note requires payment of $30,000 on March 31, 2022. The fair value
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Required:
1. Prepare journal entries to record the sale of
merchandise (omit any entry that might be required for the cost of
the goods sold), any December 31,...
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