Question

BE 18.10 (LOG 2) On March 1, 2020, Parnevik Company sold goods to Goosen Inc. for $660,000 in exchange for a 5-year, zero-interest-bearing note in the face amount of $1,062,937 (an inputed rate of 10%). The goods have an inventory cost on Parneviks books of $400,000. Prepare the journal entries for Parnevik on (a) March 1, 2020, and (b) December 31, 2020

Answer 1

Answer and Explanation:

The journal entries are shown below:

1. On March 1,2020

Note receivable Dr $1,062,937

   To Sales revenue $660,000

   To Discount on note payable  $402.937

(being the note receivable is recorded)

Cost of goods sold Dr $400,000

       To Inventory $400,000

(Being the cost is recorded)

2. On December 31, 2020

Discount on note payable ($660,000 × 10% × 10 months ÷ 12 months) $55,000

      To Interest receivable $55,000

(Being discount is recorded)