Reference no: EM133095853
Question - New Age Designs Inc. purchased equipment and a parcel of land on June 1, 2021.
In exchange for the assets, New Age Designs issued a $996,000 3-year, non-interest-bearing note to the seller.
New Age Designs will pay the note in 3 equal instalments of $332,000 on May 31 of each year.
The appraisal values for the purchased assets are as follows:
Equipment $529,700
Land 350,400
New Age Designs normally pays an interest rate of 6% on any long-term borrowings.
New Age Design has a year end of May 31.
Required -
1. Prepare the journal entry required by New Age Designs for the purchase of the assets on June 1, 2021.
2. Prepare the journal entry required by New Age Designs for the first note payment on May 31, 2022.
3. Prepare the journal entry required by New Age Designs for the second note payment on May 31, 2023.