On January 1, 2019, Worthylake Company sold used machinery to Brown Company, accepting a $25,000, non-interest-bearing note maturing on January 1, 2021. Worthylake carried the machinery on its books at a cost of $22,000 and a current book value of $15,000. Neither the fair value of the machinery nor the note was determinable at the time of sale; however, Brown’s

Chapter 13, EXERCISE #22

On January 1, 2019, Worthylake Company sold used machinery to Brown Company, accepting a $25,000, non-interest-bearing note maturing on January 1, 2021. Worthylake carried the machinery on its books at a cost of $22,000 and a current book value of $15,000. Neither the fair value of the machinery nor the note was determinable at the time of sale; however, Brown’s incremental borrowing rate was 12%.


Required:
Prepare the journal entries on Worthylake’s books to record:
1. Sale of the machinery
2. Related adjusting entries on December 31, 2019, and 2020
3. Payment of the note by Brown on January 1, 2021

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Related Book For answer-question

Intermediate Accounting Reporting and Analysis

3rd edition

Authors: James M. Wahlen, Jefferson P. Jones, Donald Pagach

ISBN: 978-1337788281