Crane Corporation issued a 4-year, $51,000, 5% note to Greenbush Company on Janu
ID: 2596344 • Letter: C
Question
Crane Corporation issued a 4-year, $51,000, 5% note to Greenbush Company on January 1, 2017, and received a computer that normally sells for $42,917. The note requires annual interest payments each December 31. The market rate of interest for a note of similar risk is 10%.
Prepare Crane’s journal entries for (a) the January 1 issuance and (b) the December 31 interest. (Round answers to 0 decimal places, e.g. 38,548. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts. Credit account titles are automatically indented when amount is entered. Do not indent manually.)
No.
Date
Account Titles and Explanation
Debit
Credit
January 1, 2017
December 31, 2017
No.
Date
Account Titles and Explanation
Debit
Credit
(a)January 1, 2017
(b)December 31, 2017
Explanation / Answer
SOLUTION:
January 1, 2017 Dr. Equipment 42,917 Dr. Discount on notes payable 8,083 Cr. Notes Payable 51,000 December 31, 2017 Dr. Interest expense 4,291 Cr. Cash 2,550 Cr. Discount on notes payable 1,741 (51,000*5% = 2,550)