Question: The Spath Company borrows $75,000 by issuing a four-year, noninterest-bearing note to a customer on January 1, 2007. In addition, Spath Company agrees to sell

The Spath Company borrows $75,000 by issuing a four-year, noninterest-bearing note to a customer on January 1, 2007. In addition, Spath Company agrees to sell inventory to the customer at reduced prices over a five-year period. Spath’s incremental borrowing rate is 12%. The customer agrees to purchase an equal amount of inventory each year over the five-year period so that a straight-line method of revenue recognition is appropriate.

Required

Prepare the journal entries on Spath Company’s books for 2007 and 2008. (Round answers to two decimal places.)

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2007 Jan 1 Cash 7500000 Discount on Notes Payable 75000 4766385 2733615 Notes Payable 7500000 U... View full answer

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