Journal entries for company purchased a special-purpose

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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.

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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.

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Reference no: EM13355780

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