Question

On January 1, 2020, GlassCase Inc. sold services worth $700,000 to their customer Lead Co. and...

On January 1, 2020, GlassCase Inc. sold services worth $700,000 to their customer Lead Co. and accepted a note as payment in full. The promissory note is a 6-year $700,000, 4% note. Interest on the note is payable annually on December 31. GlassCase is able to borrow currently at 9%, but Lead Co. has only been able to borrow at 11%.

The following interest factors may be of use in this problem (all for 6 periods):

                                                                                                 @4%                 @9%          @11%

Future value of $1                                                               1.26532            1.67710        1.87041

Present value of $1                                                            0.79031            0.59627        0.53464

Future value of an ordinary annuity                                 6.63298            7.52334        7.91286

Present value of an ordinary annuity                             5.24214           4.48592       4.23054

Required: (a) Provide the journal entry to record GlassCase’s sale of services in exchange for the promissory note on 1/1/20. SHOW ALL YOUR CALCULATIONS.

(b) Record the journal entry to record the interest received and revenue recorded at 12/31/20 by GlassCase. SHOW ALL YOUR CALCULATIONS.

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