Question

MacDonald Company sells large construction equipment. On 1 January 20X5, the company sold Chowdury Company a machine at a quoted price of $ 60,000. MacDonald collected $ 20,000 cash and received a two- year note payable for the balance.

Required:
1. Give MacDonald’s required entries for the two years, assuming an interest- bearing note, face value $ 40,000. (8% interest, simple interest, payable every 31 December.)
2. Assume that the market interest rate is still 8%. Give MacDonald’s required entries for the two years, assuming a 2% interest- bearing note, face value $ 40,000. Prepare the entries based on the gross basis.
3. Compare the interest revenue and sales revenue under requirements 1 and 2.



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  • CreatedFebruary 17, 2015
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