Headland Corporation operates a retail computer store. To improve delivery services to customers,...

Question:

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.

Notes Payable:

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

Become a Study.com member to unlock this answer!

View this answer

...
Date Particular L.F Debit Amount $ Credit Amount $
1-Apr Truck#2 a/c Dr. 38,149

See full answer below.


Learn more about this topic:

Loading...
Accounting for Non-Interest & Interest-Bearing Notes

from

Chapter 4 / Lesson 7
22K

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.


Related to this Question

Explore our homework questions and answers library