Question 5 Fredericton owes Ottawa a $1,200,000, 12%, three-year note dated December 31, 2017. Fredericton has...

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Question 5 Fredericton owes Ottawa a $1,200,000, 12%, three-year note dated December 31, 2017. Fredericton has been experienc

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Answer 1

Answer #1

Dear student.

In the following case the following journal enteries should be passed.

Date

particulars

LF

DR

CR

31.12.2019

.

ottawa 12% a/c -dr

Outstanding interest a/c-dr

to Debt holder a/c

(Being bebt holder right transfer to their account)

1200000

144000

1344000

31.12.2019

Debt holder account -dr

To Land a/c

to Capital reserve a/c

(being liability settled and profit transfer to capital reserve account)

1344000

870000

474000

Note:Fair value should not be taken into account of Land.

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Answer 2

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