Question

On March 1, 2020, Pronghorn Company sold goods to Goosen Inc. for $600,000 in exchange for a 5-year, zero-interest-bearing note in the face amount of $923,174 (an inputed rate of 9%). The goods have an inventory cost on Pronghorn’s books of $368,000. (a) Prepare the journal entries for Pronghorn on March 1, 2020. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No entry" for the account titles and enter 0 for the amounts.)

Answer 1

a.

March 1, 2020

Dr Notes Receivable 923,174

Cr Discount on Notes Receivable 323,174

Cr Sales Revenue 600,000

Dr Cost of Goods Sold 368,000

Cr Inventory 368,000

b.

December 31, 2020

Dr Discount on Notes Receivable 45,000

Cr Interest Revenue 45,000

Step-by-step explanation:

Pronghorn Company Journal entries

a.

March 1, 2020

Dr Notes Receivable 923,174

Cr Discount on Notes Receivable 323,174

Cr Sales Revenue 600,000

Dr Cost of Goods Sold 368,000

Cr Inventory 368,000

b.

December 31, 2020

Dr Discount on Notes Receivable 45,000

Cr Interest Revenue (9% X $600,000 X 10/12)45,000