Notes receivable with unrealistic interest rate


On December 31, 2012, Tran Co. performed environmental consulting services for Hayden Co. Hayden was short of cash, and Tran Co. agreed to accept a $100,000 zero-interest-bearing note due December 31, 2014, as payment in full. Hayden is somewhat of a credit risk and typically borrows funds at a rate of 15%. Tran is much more creditworthy and has various lines of credit at 8%.

Instructions

a) Prepare the journal entry to record the transaction of December 31, 2012, for Tran Co.

b) Assuming Tran Co.'s fiscal year-end is December 31, prepare the journal entry for December 31, 2013.

c) Assuming Tran Co.'s fiscal year-end is December 31, prepare the journal entry for December 31, 2014.

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Accounting Basics: Notes receivable with unrealistic interest rate
Reference No:- TGS0515722

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