On January 1, 2017, Blue Company makes the two following acquisitions. ...
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Accounting
On January 1, 2017, Blue Company makes the two following acquisitions.
| 1. | Purchases land having a fair value of $320,000 by issuing a 4-year, zero-interest-bearing promissory note in the face amount of $485,782. | |
| 2. | Purchases equipment by issuing a 6%, 9-year promissory note having a maturity value of $360,000 (interest payable annually on January 1). |
The company has to pay 11% interest for funds from its bank.
| (a) | Record the two journal entries that should be recorded by Blue Company for the two purchases on January 1, 2017. | |
| (b) | Record the interest at the end of the first year on both notes using the effective-interest method. |
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