Question

Record the 1/1/14 transaction for Fishbone Corporation and all necessary entries from 2014-2016.

Record the 1/1/14 transaction for Lost Company and all necessary entries from 2014-2016.

On January 1, 2014, Fishbone Corporation sold equipment to Lost Company that cost $250,000 and that had accumulated depreciation of $100,000 on the date of sale. Fishbone received as consideration a $240,000 non-interest-bearing note due on December 31, 2016. The prevailing rate of interest for a note of this type on January 1, 2014, was 5%.

Answer 1

Note:
Total Interest payable on Dec 31, 2016
Amount of Notes			240000
PVF @ 5% for Yr-3			0.8638
Present value of Note			207312
Total Interest payable on Dec 31, 2016			32688
Total Amount received on sale			207312
Less: Book value of Assets sold			150000
Gain on sale of assets			57312
Journal Entries Fishborne Corporation:
Date	Accounts title and explanation				Debit $	Credit $
Jan1 2014	Notes receivable Account Dr.				240000.00
	Accumulated depreciation Dr.				100000
	Equipment account					250000
	Gain on sale on assets					57312
	Interest receivable Account					32688
Dec 31 2014	Interest receivable Account Dr.				10370
	Interest revenue account					10370
	(207312*5%)
Dec312015	Interest receivable Account Dr.				10888
	Interest revenue account					10888
	(207312+10366)*5%
Dec 31 2016	Interest receivable Account Dr.				11430
	Interest revenue account					11430
	(207312+10366+10884)*5%
Dec312014	Cash account Dr.				240000
	Notes receivable Account					240000
Journal entries Lost Company:
Date	Accounts title and explanation				Debit $	Credit $
Jan 1 2014	Equipment Account Dr.				207312
	Interest payable Account Dr.				32688
	Notes payable Account					240000
31.12.14	Interest expense Account dr.				10370
	Interest payable account					10370
31.12.15	Interest expense Account dr.				10888
	Interest payable account					10888
31.12.16	Interest expense Account dr.				11430
	Interest payable account					11430
31.12.16	Notes payable Account Dr.				240000
	Cash account					240000