On October 1, 2020, Monty Equipment Company sold a pecan-harvesting machine to Valco Brothers Farm, Inc....

On October 1, 2020, Monty Equipment Company sold a pecan-harvesting machine to Valco Brothers Farm, Inc. In lieu of a cash payment Valco Brothers Farm gave Arden a 2-year, $193,200, 10% note (a realistic rate of interest for a note of this type). The note required interest to be paid annually on October 1. Monty’s financial statements are prepared on a calendar-year basis.

Assuming Valco Brothers Farm fulfills all the terms of the note, prepare the necessary journal entries for Monty Equipment Company for the entire term of the note. Assume that reversing entries are not made on January 1, 2021 and January 1, 2022. (

Expert Solution

Answer
Date	Account and Explanation	Debit	Credit
Oct 1,2020	Notes receivable	$ 193,200
	Sales revenue		$ 193,200
	(To record Sales)

Dec 31,2020	Interest receivable (19320010%3/12)	$ 4830
	Interest revenue		$ 4830
	(To record interest)

Oct 1,2021	Cash (193200*10%)	$ 19320
	Interest receivable		$ 4830
	Interest revenue		$ 14490
	(To record interest received)

Dec 31,2021	Interest receivable	$ 4830
	Interest revenue		$ 4830
	(To record interest)

Oct 1,2022	Cash	$ 212520
	Interest receivable		$ 4830
	Interest revenue		$ 14490
	Notes receivable		$ 193,200
	(To record amount received)

ekkarill92 answered 1 year ago

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