On January 1, 2020, Jacobs Company sells land financed through a $32,000 note, issued by Andress Company. The note is a $32,000, 9%, annual interest-bearing note. Andress agrees to repay the $32,000 proceeds on December 31, 2021. The prevailing interest rate on similar notes is 11%. Assume that the cost of the land is equal to the fair value of the note.

Required

Prepare all entries for Jacobs over the note term, including any year-end adjustments. Use the effective interest method to amortize the discount.

 

Transcribed Image Text:

Date Jan. 1, 2020 Note Receivable Discount on Note Receivable Land Dec. 31, 2020 Cash Account Name Discount on Note Receivable Interest Revenue Dec. 31, 2021 Cash Discount on Note Receivable Interest Revenue To record interest on note Dec. 31, 2021 Cash Note Receivable To record settlement of note (7 * ** Dr. 32,000 0 0 2,880✔ x 0✔ 2,880 x 32,000 ✓ 0 Cr. 0 0 D 0 0 0 32,000 x * Date Jan. 1, 2020 Note Receivable Discount on Note Receivable Land Dec. 31, 2020 Cash Account Name Discount on Note Receivable Interest Revenue Dec. 31, 2021 Cash Discount on Note Receivable Interest Revenue To record interest on note Dec. 31, 2021 Cash Note Receivable To record settlement of note (7 * ** Dr. 32,000 0 0 2,880✔ x 0✔ 2,880 x 32,000 ✓ 0 Cr. 0 0 D 0 0 0 32,000 x *

Answer rating: 100% (QA)

fair value of note 3090399 PV11232000932000 Note face value 32... View the full answer