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On December 1, 2020, Pack Corp. purchased a building and machinery for a combined cost...

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Accounting

On December 1, 2020, Pack Corp. purchased a building and machinery for a combined cost of $350,000. Pack paid $100,000 down in cash and financed the remaining $250,000 through issuing a 1-year, 9% term note. Both interest and principal on the note are due when the note matures on December 1, 2021.

The Company has determined that the building and machinery have fair market values of $300,000 and $100,000, respectively.

1. Prepare the journal entry Pack should make to record the acquisition of the two assets.

Date

Debit

Credit

12/1/20

2. Assume that Pack has a December 31 year-end. Prepare the 12/31/20 accrued interest entry and the 12/1/21 entry.

Note: Ignore the year-end depreciation entry and round interest calculations to the nearest whole month and dollar.

Date

Debit

Credit

12/31/2020

12/1/2021

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