Prepare the journal entries on Spath books

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Problem - Note Payable Exchanged for Cash and Rights - Spath Company borrows $75,000 by issuing a 4-year, non-interest-bearing note to a customer on January 1, 2019. In addition, Spath agrees to sell inventory to the customer at reduced prices over a 5-year period. Spath's incremental borrowing rate is 12%. The customer agrees to purchase an equal amount of inventory each year over the 5-year period so that a straight-line method of revenue recognition is appropriate.

Required - Prepare the journal entries on Spath's books for 2019 and 2020.

Reference no: EM132888885

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