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On January 1, 2017, Larkspur Company makes the two following acquisitions. ...

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Accounting

On January 1, 2017, Larkspur Company makes the two following acquisitions.

1. Purchases land having a fair value of $290,000 by issuing a 5-year, zero-interest-bearing promissory note in the face amount of $467,048.
2. Purchases equipment by issuing a 7%, 9-year promissory note having a maturity value of $450,000 (interest payable annually on January 1).

The company has to pay 10% interest for funds from its bank.

(a) Record the two journal entries that should be recorded by Larkspur 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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No. Date Account Titles and Explanation Debit Credit (a) 1. January 1, 2017 Land 290,000 Discount on Bonds Payable 177048 Notes Payable 467048 2. January 1, 2017Equipment Discount on Notes Payable Notes Payable (b) 1. December 31, 2017 inter Discount on Notes Payable 2. December 31, 2017 Interest Expense Discount on Notes Payable Cash

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