Prepare the journal entry to record the sale on january

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Question - On January 1, 2014, Halifax Jewelry Ltd receives a five-year, $200,000 zero-interest bearing note in payment of goods sold. The present value of the note equals the agreed upon sales price of $124,000. Halifax Jewelry is a privately held company and follows ASPE.

Instructions

a) Assuming Halifax Jewelry uses the straight-line method to amortize the note's discount, prepare the journal entry to record the sale on January 1, and the interest accrual on December 31, 2014.

b) Assuming Halifax Jewelry uses the effective interest method to amortize the note's discount, prepare the journal entry to record the sale on January 1, and the interest accrual on December 31, 2014 and December 31, 2015. The market rate of interest on similar notes is 10%.

Reference no: EM132032392

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