Question

On March 1, 2017, Waterway Company sold goods to Goosen Inc. for $642,000 in exchange for a 5-year, zero-interest-bearing note in the face amount of $1,033,947 (an inputed rate of 10%). The goods have an inventory cost on Waterway’s books of $405,000. (a) Prepare the journal entries for Waterway on March 1, 2017. (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.) Date Account Titles and Explanation Debit Credit Mar. 1, 2017 Entry field with correct answer Notes Receivable Entry field with correct answer 1033947 Entry field with correct answer Entry field with correct answer Sales Revenue Entry field with correct answer Entry field with correct answer 642000 Entry field with correct answer Discount on Notes Receivable Entry field with correct answer Entry field with correct answer 391947 (To record sales) Entry field with correct answer Cost of Goods Sold Entry field with correct answer 405000 Entry field with correct answer Entry field with correct answer Inventory Entry field with correct answer Entry field with correct answer 405000 (To record cost of goods sold) (b) Prepare the journal entries for Waterway on December 31, 2017. (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.) Date Account Titles and Explanation Debit Credit Dec. 31, 2017 Entry field with incorrect answer Entry field with incorrect answer Entry field with incorrect answer Entry field with incorrect answer Entry field with incorrect answer Entry field with incorrect answer

Answer 1

Solution a:

Date	Account Title and Explanation	Debit	Credit
01-Mar	Notes Receivable Dr	$10,33,947.00
	To Sales Revenue		$6,42,000.00
	To Discount on Notes receivable		$3,91,947.00
	( To record sales)
01-Mar	Cost of Goods sold Dr	$4,05,000.00
	To Inventory		$4,05,000.00
	(To record cost of goods sold)

Solution b:

Date	Account Title and Explanation	Debit	Credit
31-Dec	Discount on Notes receivable Dr	$53,500.00
	To Interest Revenue ($642000*10%*10/12)		$53,500.00
	(To record Interest revenue for 10 months from 1-March 2017 to 31 Dec 2017)