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Journal entries

On December 31, 2007 A Corporation sold some of its product to D Company, accepting a 3%, four-year promissory note having a maturity value of $900,000 (interest payable annually on December 31). D Company pays 8% for its borrowed funds.

Instructions
(a) Prepare the journal entries to record the transaction on the books of A Corporation at December 31, 2007. (Assume that the effective interest method is used. Use the interest tables below and round to the nearest dollar.)
Accounts Debit Credit

(b) Make all appropriate entries for 2008 on the books of A Corporation.
Accounts Debit Credit

(c) Make all appropriate entries for 2009 on the books of A Corporation.
Accounts Debit Credit

For use with Problem 12
Table 1
Present Value of 1

Periods 2% 3% 4% 6% 8%
1 0.98039 0.97087 0.96154 0.94340 0.92593
2 0.96117 0.94260 0.92456 0.89000 0.85734
3 0.94232 0.91514 0.88900 0.83962 0.79383
4 0.92385 0.88849 0.85480 0.79209 0.73503
5 0.90573 0.86261 0.82193 0.74726 0.68058

Table 2
Present Value of Ordinary Annuity of 1

Periodic Rents 2% 3% 4% 6% 8%
1 0.98039 0.97087 0.96154 0.94340 0.92593
2 1.94156 1.91347 1.88609 1.83339 1.78326
3 2.88388 2.82861 2.77509 2.67301 2.57710
4 3.80773 3.71710 3.62990 3.46511 3.31213
5 4.71346 4.57971 4.45182 4.21236 3.99271

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Solution Summary

The solution explains the journal entries for sale against promissory note

$2.19