Application Week 6
On July 10, 2010, Harris Co. sold a machine to Jackson. On July 15, 2010, Harris accepted a $35,000 non-interest-bearing note from Jackson that was due July 10, 2013. Harris carried the machine on its books at a cost of $30,000 with a book value of $22,000. The fair value of the machine and the note was not known at the time of the sale; however, Harris' incremental borrowing rate was 10%.
Prepare the following journal entries on Harris’s books and submit your response in the form of a Word document, Excel spreadsheet, or Quickbooks document:
- Record the sale of the truck.
Note Receivable 35,000
Accumulated depreciation 8,000
Discount on Notes Receivable 3,592
Equipment 30,000
Gain on sale of equipment 9,408
- Provide the adjusting entries related to the note at December 31, 2010, December 31, 2011, and December 31, 2012.
December 31, 2010
Discount on Notes Receivable 3,148
Interest Revenue 3,148
December 31, 2011
Discount on Notes Receivable 2,826
Interest Revenue 2,826
December 31, 2012
Discount on Notes Receivable 2,543
Interest Revenue 2,543