Journal entries for company purchased a special-purpose

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Reference no: EM1310897

Journal entries for Company purchased a special-purpose duplicating machine by issuing a five-year zero-interest bearing note.

1.(3/1/2009)Goochland Company makes a loan to Betterment Corporation and receives in exchange a three-year, $50,000 note bearing interest at a 9% annual rate. Interest is paid annually. The market rate of interest for similar notes less similar risk is 11%, and Goochland thus recognizes some discount upon the issuance of the note.

Date	Account Titles	Debit	Credit

2.(3/1/2009) Goochland Company purchased a special-purpose duplicating machine from Zyborg Corporation by issuing a five-year zero-interest bearing note for $120,000. The current market rate of interest for similar obligations is 8%, and Goochland will pay off the note in five equal annual installments, beginning on March 1, 2010. The fair market value of the machine cannot be readily determined. A discount account related to the note should be utilized to insure that the machine is recorded on the books at its estimated current value.

Date	Account Titles	Debit	Credit

Reference no: EM1310897

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