On January 1, 2020, Pearl Company makes the two following acquisitions. 1. Purchases land having a fair value...

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Accounting

On January 1, 2020, Pearl Company makes the two followingacquisitions.
1. Purchases land having a fair value of $360,000 by issuing a4-year, zero-interest-bearing promissory note in the face amount of$566,467.
2. Purchases equipment by issuing a 7%, 9-year promissory notehaving a maturity value of $520,000 (interest payableannually).

The company has to pay 12% interest for funds from itsbank.
(a) Record the two journal entries that should be recorded by PearlCompany for the two purchases on January 1, 2020.
(b) Record the interest at the end of the first year on both notesusing the effective-interest method.

(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, 2020
enter an account title to record the first purchase on January1, 2017
enter a debit amount
enter a credit amount
enter an account title to record the first purchase on January1, 2017
enter a debit amount
enter a credit amount
enter an account title to record the first purchase on January1, 2017
enter a debit amount
enter a credit amount
2.
January 1, 2020
enter an account title to record the second purchase on January1, 2017
enter a debit amount
enter a credit amount
enter an account title to record the second purchase on January1, 2017
enter a debit amount
enter a credit amount
enter an account title to record the second purchase on January1, 2017
enter a debit amount
enter a credit amount
(b) 1.
December 31, 2020
to record the interest on the first note using theeffective-interest method on December 31, 2017
enter a debit amount
enter a credit amount
to record the interest on the first note using theeffective-interest method on December 31, 2017
enter a debit amount
enter a credit amount
2.
December 31, 2020
to record the interest on the second note using theeffective-interest method on December 31, 2017
enter a debit amount
enter a credit amount
to record the interest on the second note using theeffective-interest method on December 31, 2017
enter a debit amount
enter a credit amount
to record the interest on the second note using theeffective-interest method on December 31, 2017
enter a debit amount
enter a credit amount

No.	Date	Account Titles and Explanation	Debit	Credit
(a) 1.	January 1, 2020	enter an account title to record the first purchase on January1, 2017	enter a debit amount	enter a credit amount
		enter an account title to record the first purchase on January1, 2017	enter a debit amount	enter a credit amount
		enter an account title to record the first purchase on January1, 2017	enter a debit amount	enter a credit amount
2.	January 1, 2020	enter an account title to record the second purchase on January1, 2017	enter a debit amount	enter a credit amount
		enter an account title to record the second purchase on January1, 2017	enter a debit amount	enter a credit amount
		enter an account title to record the second purchase on January1, 2017	enter a debit amount	enter a credit amount
(b) 1.	December 31, 2020	to record the interest on the first note using theeffective-interest method on December 31, 2017	enter a debit amount	enter a credit amount
		to record the interest on the first note using theeffective-interest method on December 31, 2017	enter a debit amount	enter a credit amount
2.	December 31, 2020	to record the interest on the second note using theeffective-interest method on December 31, 2017	enter a debit amount	enter a credit amount
		to record the interest on the second note using theeffective-interest method on December 31, 2017	enter a debit amount	enter a credit amount
		to record the interest on the second note using theeffective-interest method on December 31, 2017	enter a debit amount	enter a credit amount

Answer & Explanation Solved by verified expert

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No Date Account titles and explanation Debit Credit a 1 Jan 1 2020 Land 360000 Discount on notes payable 566467360000 206467 Note payable 566467 To record land purchased 2 Jan 1 See Answer

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1.		Purchases land having a fair value of $360,000 by issuing a4-year, zero-interest-bearing promissory note in the face amount of$566,467.
2.		Purchases equipment by issuing a 7%, 9-year promissory notehaving a maturity value of $520,000 (interest payableannually).

(a)		Record the two journal entries that should be recorded by PearlCompany for the two purchases on January 1, 2020.
(b)		Record the interest at the end of the first year on both notesusing the effective-interest method.