On January 1, 2014, Guillemette Inc. makes the following acquisitions: 1. Purchases land having a fair market

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On January 1, 2014, Guillemette Inc. makes the following acquisitions:
1. Purchases land having a fair market value of $300,000 by issuing a five-year, non-interest-bearing promissory note in the face amount of $505,518.
2. Purchases equipment by issuing an eight-year, 6% promissory note having a maturity value of $275,000 (interest payable annually).
The company has to pay 11% interest on funds from its bank.
Instructions
(a) Record Guillemette's journal entries on January 1, 2014, for each of the purchases.
(b) Record the interest at the end of the first year on both notes using the effective interest method.
Maturity
Maturity is the date on which the life of a transaction or financial instrument ends, after which it must either be renewed, or it will cease to exist. The term is commonly used for deposits, foreign exchange spot, and forward transactions, interest...
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Intermediate Accounting

ISBN: 978-1118300855

10th Canadian Edition Volume 2

Authors: Donald E. Kieso, Jerry J. Weygandt, Terry D. Warfield, Nicola M. Young, Irene M. Wiecek, Bruce J. McConomy

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