Question

On December 31, 2015, Ed Abbey Co. performed environmental consulting services for Hayduke Co. Hayduke was short of cash, and Ed Abbey Co. agreed to accept a $200,000 zero-interest-bearing note due December 31, 2017, as payment in full.
Hayduke is somewhat of a credit risk and typically borrows funds at a rate of 10%. Ed Abbey is much more creditworthy and has various lines of credit at 6%.1.)Prepare the journal entry to record the transaction of December 31, 2015, for the Ed Abbey Co.2.)Assuming Ed Abbey Co.’s fiscal year-end is December 31, prepare the journal entry for December 31, 2016.3.) Assuming Ed Abbey Co.’s fiscal year-end is December 31, prepare the journal entry for December 31, 2017.

Answer 1

Answer:ED Abbey journal $

Date

December 31, 2015

Note Receivable Dr 200,000

Consulting services Cr. 200,000

Narration.record of non interest note receivable due in 2017

December 2016.

Note receivable Dr 200,000

Consulting services Cr. 200,000

Narration. record of non interest receivable note due in 2017

December 2017

Note receivable Dr 200,000

Consulting services. Cr 200,000

Narration. record of non interest receivable note due in 2017.

Explanation:

The notes receivable was issued for service render and it's a non Interest bearing note even though it's payable in the future. This makes the figure to be constant throughout the year, though the company loan acquisition rate was given it does not affect the solution since no loan was bought in the interval.

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