Problemon january 1 2013 mclean company makes the two, Ask an Expert

Accounting

Problem:

On January 1, 2013, McLean Company makes the two following acquisitions. 1. Purchases land having a fair value of $326,000 by issuing a 4-year, zero-interest-bearing promissory note in the face amount of $512,967. 2. Purchases equipment by issuing a 6%, 9-year promissory note having a maturity value of $412,000. (interest payable annually). The company has to pay 12% interest for funds from its bank.

Required:

Question 1: Record the two journal entries that should be recorded by McLean Company for the two purchases on January 1, 2013.

Question 2: Record the interest at the end of the first year on both notes using the effective-interest method.

Note: Be sure to show how you arrived at your answer.

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Accounting Basics, Accounting

Category:- Accounting Basics
Reference No.:- M91165427

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