Question

On October 1, Bandor Company sold land (that cost $30,000) on credit for $35,000. The buyer issued an 8%, 12-month note for this amount, with the interest to be paid on the maturity date.

Answer 1

Check the explanation

Explanation:

Journal entries are as follows:-

Date Account Titles Debit Credit

Oct-01. 8% Note Receivable $35,000.00

Land $30,000.00

Gain on sale $5,000.00

(Sale of Land)

Dec-31 Interest Receivable $700.00

Interest Revenue $700.00

(Interest revenue on Note for 3 mon. recognized)

($35,000 * 8% *3/12 = $700)