business borrowed $200,000 on January 1, 2019 to be paid back on January 1 2022. On January 1, 2019, the business received an amount equal to $200,000, less discounted interest based on 11.5% per year, which is the market rate. The company closes its books every December 31. a. Prepare the journal entry for the debtor on January 1, 2019. b. Prepare the journal entry on December 31, 2020 related to this debt.
business borrowed $200,000 on January 1, 2019 to be paid back on January 1 2022. On January 1, 2019, the business received an amount equal to $200,000, less discounted interest based on 11.5% per year, which is the market rate. The company closes its books every December 31. a. Prepare the journal entry for the debtor on January 1, 2019. b. Prepare the journal entry on December 31, 2020 related to this debt.
Cornerstones of Financial Accounting
4th Edition
ISBN:9781337690881
Author:Jay Rich, Jeff Jones
Publisher:Jay Rich, Jeff Jones
Chapter9: Long-term Liabilities
Section: Chapter Questions
Problem 92PSA
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Hw.128.
A business borrowed $200,000 on January 1, 2019 to be paid back on January 1 2022. On January 1, 2019, the business received an amount equal to $200,000, less discounted interest based on 11.5% per year, which is the market rate. The company closes its books every December 31.
a. Prepare the journal entry for the debtor on January 1, 2019.
b. Prepare the journal entry on December 31, 2020 related to this debt.
Suppose that the company from the previous exercise number 4 received the full sum of $200,000 on January 1, 2019 and committed to repay the loan by making three annual payments (January 1 of 2020, 2021 and 2022) equal based on an interest rate of 11.5%.
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