Question

Sandhill Corporation issued a 5-year, $86,000, zero-interest-bearing note to Garcia Company on January 1, 2020, and received cash of $86,000. In addition, Sandhill agreed to sell merchandise to Garcia at an amount less than regular selling price over the 5-year period. The market rate of interest for similar notes is 12%.

Prepare Sandhill Corporation’s January 1 journal entry. (Round present value factor calculations to 5 decimal places, e.g. 1.25124 and final answer to 0 decimal places, e.g. 38,548. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts. Credit account titles are automatically indented when amount is entered. Do not indent manually.)

Date	Account Titles and Explanation	Debit	Credit
January 1, 2020

Answer 1

Date	Account Titles and Explanation	Debit	Credit
Jan -01 , 2020	Cash	$ 86,000
	Discount on Note Payable ( $86,000 (-) $48,799)	$ 37,201
	Note Payable		$ 86,000
	Unearned Sales Revenue		$ 37,201
	(To record Note payable at Discount )
	Workings:
	Present value of Note     = $ 86,000 x PVF ( 12%, 5 periods)     = $ 86,000 x 0.56743     = $ 48,799