Headland Corporation operates a retail computer store. To improve delivery services to customers, the company purchases four new trucks on April 1, 2017. The terms of acquisition for each truck are described below.
Truck #2 has a list price of $41,120 and is acquired for a down payment of $5,140 cash and a zero-interest-bearing note with a face amount of $35,980. The note is due April 1, 2018. Headland would normally have to pay interest at a rate of 9% for such a borrowing, and the dealership has an incremental borrowing rate of 8%.
Prepare the journal entry for this transaction.
It is the instrument that indicates how much amount is due to the outsiders. It is the liabilities of the company as it needs to be paid on its maturity date. It also helps to borrow money from the outsiders.
Answer and Explanation: 1
|Date||Particular||L.F||Debit Amount $||Credit Amount $|
|1-Apr||Truck#2 a/c Dr.||38,149|
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fromChapter 4 / Lesson 7
Discover how to account for both non-interest and interest-bearing notes. Examine a dilemma presented in an example, explore a detailed overview of both interest-bearing and non-interest-bearing notes, and see how to put it all together.