On May 1, 2014, Lubin’s Heavy Equipment sold a piece of equipment to Perry Products, Inc., at a selling price of $ 4,850,000. Lubin’s agreed to accept a 10- month, 8% note with interest due on its maturity date, March 1, 2015. Lubin’s year-end is December 31. Assume that 8% is reasonable when compared to the going market rate of interest for similar financing arrangements.
Required
Prepare the journal entries to record the following events:
a. The equipment sale on May 1, 2014. Ignore cost of goods sold and the reduction of inventory. b. The year- end interest accrual on December 31, 2014.
c. The collection of the note receivable on its maturity date of March 1, 2015.
d. Assume that Lubin’s sells the note receivable on January 15, 2015, for $ 5,120,000. Record the journal entry for the sale. Assume the transaction qualifies as a sale.