On January 1, 2020, Carter Company makes the two following acquisitions. 1. Purchases land having a fair value of $200,000 by issuing a 5-year, zero-interest-bearing promissory note in the face amount of $337,012. 2. Purchases equipment by issuing a 6%, 8-year promissory note having a maturity value of $250,000 (interest payable annually). The company has to pay 11% interest for funds from its bank. (a) Record the two journal entries that should be recorded by Carter Company for the two purchases on January 1, 2020. (b) Record the interest at the end of the first year on both notes using the effective-interest method.

PART A.

1. January 1, 2020

Account Titles and Explanation Debit Credit

Land 200,000

Discount on Notes Payable 137,012

Notes Payable 337,012

2. January 1, 2020

Account Titles and Explanation Debit Credit

Equipment 185,673

Discount on Notes Payable 64,327

Notes Payable 250,000

Solution:

A. 2. Computation of the discount on notes payable:

Maturity value $250,000

Present value of $250,000 due in 8 years at 11% = $250,000 x 0.43393 = $108,483

Present value of $15,000 payable annually for 8 years at 11% annually = $15,000 x 5.14612

= 77,192

Present value of the note (185,675)

Discount $64,325.

PART B

1. December 31, 2020

Account Titles and Explanation Debit Credit

Interest Expense 22,000

Discount on Notes Payable 22,000

2. December 31, 2020

Account Titles and Explanation Debit Credit

Interest Expense 20,424.08

Discount on Notes Payable 5,424.08

Interest Payable 15,000

Solution:

(b) 1. Discount on Notes Payable = ($200,000 x 11%) = $22,000

(b) 2. Interest Expense = ($185,675 x 11%) = $20,424

Interest Payable = ($250,000 x 6%) = $15,000

you will have $2593.74 in 10 years if you set aside $1,000 at 10%

you will have $9321.91 in 20 years if you set aside $2000 at 8%

you will have $1469.32 in 5 years if you set aside $1000 at 8%

you will have $1296.87 in 10 years if you set aside $500 at 10%

you will have $239.66 in 15 years if you set aside $100 at 6%

you will have $4660.96 in 20 years if you set aside $1000 at 8%

lbc corporation makes and sells a product called product wz. each unit of product wz requires 4.1 hours of direct labor at the rate of $20.00 per direct labor-hour. management would like you to prepare a direct labor budget for june. the company plans to sell 28,000 units of product wz in june. the finished goods inventories o