Exchange of a Note Payable for an Asset
Response to the following problem:
The Webb Corporation purchased an asset from the Shaw Corporation on January 1, 2010. Shaw accepted a three-year, non-interest-bearing note of $18,000 due December 31, 2012, in exchange for the asset. Neither the fair value of the asset nor that of the note is available. Webb's incremental borrowing rate is 12%.
Required
Prepare the journal entries to record the issuance of the note, retirement, and any interest expense on the books of Webb on each of the following dates:
1. January 1, 2010 3. December 31, 2011
2. December 31, 2010 4. December 31, 2012 .