Answered

On July 1, 2020, Riverbed Inc. made two sales.
1. It sold land having a fair value of $912,330 in exchange for a 4-year zero-interest-bearing promissory note in the face amount of $1,435,565. The land is carried on Riverbed's books at a cost of $597,200.
2. It rendered services in exchange for a 3%, 8-year promissory note having a face value of $401,660 (interest payable annually).
Riverbed Inc. recently had to pay 8% interest for money that it borrowed from British National Bank. The customers in these two transactions have credit ratings that require them to borrow money at 12% interest.
Record the two journal entries that should be recorded by Agincourt Inc. for the sales transactions above that took place on July 1, 2014.

Answer :

anthougo

Answer:

Riverbed Inc.

Journal Entries:

1. Debit 0% 4-year Promissory Notes Receivable $1,435,565  

Credit Land $597,200

Credit Gain on Sale of Land $315,130

Credit Interest Revenue $523,235

To record the sale of land in exchange for a note with face value of $1,435,565

2. Debit 3% 8-year Promissory Note Receivable $401,660

Credit Service Revenue $162,224

Credit Interest Revenue $239,436

To record the rendering of service in exchange for a note with face value of $401,660.

Explanation:

a) Data and Analysis:

July 1, 2020:

1. 0% 4-year Promissory Notes Receivable $1,435,565  Land $597,200 Gain on Sale of Land $315,130 Interest Revenue $523,235

From an online financial calculator, the PV and Interest:

N (# of periods)  4

I/Y (Interest per year)  12

PMT (Periodic Payment)  0

FV (Future Value)  1435565

Results

PV = $912,330

Total Interest $523,235

Gain on Sale of Land:

Fair value of the land = $912,330

Book value of the land   597,200

Gain on sale of land =   $315,130

2. 3% 8-year Promissory Note Receivable $401,660 Service Revenue $162,224 Interest Revenue $239,436

From an online financial calculator, the PV and Interest:

N (# of periods)  8

I/Y (Interest per year)  12

PMT (Periodic Payment)  0

FV (Future Value)  401660

 

Results

PV = $162,224

Total Interest $239,436

Other Questions