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Worthylake company sold used machinery

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Reference no: EM13871388

On January 1, 2010, Worthylake Company sold used machinery to Brown Company, accepting a $25,000 non interest bearing note maturing on January 1, 2012. Worthylake Company carried the machinery on its books at a cost of $22,000 and a current book value of $15,000. Neither the fair value of the machinery nor the note was determinable at the time of sale; however, Brown's incremental borrowing rate was 12%.

Required:
Prepare the journal entries on Worthylake Company's books to record:
1. The sale of the machinery
2. The related adjusting entries on December 31, 2010 and 2011
3. The payment of the note by Brown Company on January 1, 2012 

Reference no: EM13871388

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