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Bandor Company- Adjusting Entry

RE.03.04

On October 1, Bandor Company sold land (that cost $17,000) on credit for $24,000. The buyer issued a(n) 10%, 12-month note for this amount, with the interest to be paid on the maturity date.

Required:

Prepare journal entries to record the sale of the land and the related year-end adjusting entry.

Answer:

DATEACCOUNT TITLEPOST. REF.DEBITCREDIT
Oct. 1Note Receivable24,0000
Land17,000
Gain on Sale of Land7,000
DATEACCOUNT TITLEPOST. REF.DEBITCREDIT
Dec. 31Interest Receivable600
Interest Revenue600

Calculation of Interest = $24,000 x 10% = $2,400

Monthly Interest = $2,400/12 = $200

October, November and December so 3 months interest accured = $200 x 3 = $600

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