On May 1, 2018, Lubin's Heavy Equipment sold a piece of equipment to Perry Products, Inc., at
Question:
On May 1, 2018, 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, 2019. 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, 2018. Ignore cost of goods sold and the reduction of inventory.
b. The year-end interest accrual on December 31, 2018.
c. The collection of the note receivable on its maturity dace of March 1, 2019.
d. Assume that Lubin's sells the note receivable on January 15. 2019, for $5,120,000.
Record the journal entry for the sale. Assume that the transaction qualifies as a sale.
MaturityMaturity 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...
Step by Step Answer:
Intermediate Accounting
ISBN: 978-0134730370
2nd edition
Authors: Elizabeth A. Gordon, Jana S. Raedy, Alexander J. Sannella