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On April 1, 20X7, Miller Oil Company purchased a pumping truck. The sole consideration was a $100,000 note due in one year. Interest of $12,000 was included the face amount of the note. If Miller had purchased the truck for cash, the purchase price would have been only $88,000.

(a) Prepare the appropriate journal entry to record the purchase on April 1, 20X7.

(b) Prepare the appropriate journal entry to record the year-end discount amortization on December 31, 20X7.

(d) What was the actual rate of interest on this loan?

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Accounting Basics, Accounting

Category:- Accounting Basics
Reference No.:- M948373

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