Exercise 14-16 On January 1, 2017, Larkspur Company makes thetwo following acquisitions. 1. Purchases...

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Accounting

Exercise 14-16 On January 1, 2017, Larkspur Company makes thetwo following acquisitions. 1. Purchases land having a fair valueof $290,000 by issuing a 5-year, zero-interest-bearing promissorynote in the face amount of $488,667. 2. Purchases equipment byissuing a 6%, 8-year promissory note having a maturity value of$330,000 (interest payable annually on January 1). The company hasto pay 11% interest for funds from its bank. (a) Record the twojournal entries that should be recorded by Larkspur Company for thetwo purchases on January 1, 2017. (b) Record the interest at theend of the first year on both notes using the effective-interestmethod. (Round present value factor calculations to 5 decimalplaces, e.g. 1.25124 and the final answer to 0 decimal places e.g.58,971. If no entry is required, select "No Entry" for the accounttitles and enter 0 for the amounts. Credit account titles areautomatically indented when amount is entered. Do not indentmanually.) No. Date Account Titles and Explanation Debit Credit (a)1. January 1, 2017 2. January 1, 2017 (b) 1. December 31, 2017 2.December 31, 2017

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Solution a Fair value of equipment Present value of interest and maturity value discounted at 11 3300006 Cumulative PV Factor at 11 for 8 periods 330000 PV Factor at 11 for 8th See Answer

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In: AccountingExercise 14-16 On January 1, 2017, Larkspur Company makes thetwo following acquisitions. 1. Purchases land...Exercise 14-16 On January 1, 2017, Larkspur Company makes thetwo following acquisitions. 1. Purchases land having a fair valueof $290,000 by issuing a 5-year, zero-interest-bearing promissorynote in the face amount of $488,667. 2. Purchases equipment byissuing a 6%, 8-year promissory note having a maturity value of$330,000 (interest payable annually on January 1). The company hasto pay 11% interest for funds from its bank. (a) Record the twojournal entries that should be recorded by Larkspur Company for thetwo purchases on January 1, 2017. (b) Record the interest at theend of the first year on both notes using the effective-interestmethod. (Round present value factor calculations to 5 decimalplaces, e.g. 1.25124 and the final answer to 0 decimal places e.g.58,971. If no entry is required, select "No Entry" for the accounttitles and enter 0 for the amounts. Credit account titles areautomatically indented when amount is entered. Do not indentmanually.) No. Date Account Titles and Explanation Debit Credit (a)1. January 1, 2017 2. January 1, 2017 (b) 1. December 31, 2017 2.December 31, 2017