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Question: spath company borrows 75000 by issuing a 4year noninterest bearing...

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Spath Company borrows $75,000 by issuing a 4-year, noninterest- bearing note to a customer on January 1, 2016. In addition, Spath agrees to sell inventory to the customer at reduced prices over a 5-year period. Spath’s incremental borrowing rate is 12%. The customer agrees to purchase an equal amount of inventory each year over the 5-year period so that a straight-line method of revenue recognition is appropriate.

!!!!!!!!!!!!!!!!! you have to use present value table !!!!!!!!!!!!!!!!!!!

Required:

Prepare the journal entries on Spath’s books for 2016 and 2017.
CHART OF ACCOUNTS
Spath Company
General Ledger
ASSETS
111 Cash
121 Accounts Receivable
141 Inventory
152 Prepaid Insurance
181 Equipment
198 Accumulated Depreciation
LIABILITIES
211 Accounts Payable
231 Salaries Payable
250 Unearned Revenue
251 Notes Payable
252 Discount on Notes Payable
261 Income Taxes Payable
EQUITY
311 Common Stock
331 Retained Earnings
REVENUE
411 Sales Revenue
EXPENSES
500 Cost of Goods Sold
511 Insurance Expense
512 Utilities Expense
521 Salaries Expense
532 Bad Debt Expense
540 Interest Expense
541 Depreciation Expense
559 Miscellaneous Expenses
910 Income Tax Expense

Prepare the journal entries on Spath’s books for 2016 and December 31, 2017. Additional Instructions

Please fill out both charts for PAGE 2016 and PAGE 2017. There is supposed to be two charts. First chart (2016) with 8 entries and the second chart (2017) with 4 entries.

GENERAL JOURNAL

DATE ACCOUNT TITLE POST. REF. DEBIT CREDIT

1

2

3

4

5

6

7

8

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