Question

Can I get some help on the wrong ones please.

Recording Purchase of Equipment through Debt and Equity On January 1, 2020, Sidelines Company purchases equipment with an estimated 6-year useful life by making a $14,000 cash payment and issuing a noninterset-bearing note for $48,000 due in two years. The fair value of the the equipment is unknown. An 11% annual interest rate is typical of this transaction. The company uses the effective interest method to amortize interest expense and the straight-line method to estimate depreciation expense. a. Prepare the entry to record the purchase on January 1, 2020. b. Prepare the entry on December 31, 2020, to record (1) interest expense and (2) depreciation expense. c. Indicate the balance sheet presentation related to this transaction as of December 31, 2020. d. Prepare the entry on December 31, 2021, to record (1) interest expense and payment of the note and (2) depreciation expense. e. Assume instead that Sidelines exchanged 1,000 shares of its own $10 par value common stock along with $14,000 cash for the equipment. At the date of the exchange, the stock was trading on the market at $40 per share. Prepare the entry to record the purchase of equipment. Purchase of Equipment with Debt Purchase of Equipment through Equity

Answer 1

Note payable Annual interest rate PV factor PV of note payable Discount on issue $48,000 11% 0.8116 $38,958 $9,042 a Credit Date Jan 1, 2020 Account name Equipment Discount on note payable Cash Note payable Debit $52,958 $9,042 $14,000 $48,000 b Debit $4,285 Credit $38,958*11% $4,285 Date Account name Dec 31, 2020 Interest expense Discount on note payable (To record interest expense) Dec 31, 2020 Depreciation expense Equipment (To record depreciation) $8,826 $52,958/6 years $8,826 2020 Balance Sheet, December 31st Assets Equipment.net $44,1321 Liabilities Note payable, net $43,243 d Debit $4,757 Credit $43,243*11% $4,757 $48,000 Date Account name Dec 31, 2021 Interest expense Discount on note payable (To record interest expense) Dec 31, 2021 Note payable Cash (To record payment of note) Dec 31, 2021 Depreciation expense Equipment (To record depreciation ) $48,000 $8,826 $52,958/6 years $8,826 Credit Debit $54,000 Date Account name Dec 31, 2021 Equipment Cash Common stock Additional paid in capital - Common stock (To record purchase of equipment) $14,000 $10,000 1000*$10 $30,000 1000*$30