On January 1, 2019, Merck Manufacturing borrowed and received $2,000,000 from one of its major...
80.2K
Verified Solution
Link Copied!
Question
Accounting
On January 1, 2019, Merck Manufacturing borrowed and received $2,000,000 from one of its major customers, Felix Innovations by signing a zero-interest bearing note with a maturity value of $2,000,000 due in five years. The appropriate rate of interest applicable to this note (based on prime interest rate, borrowers credit rating and general market interest rate of similar note) is 6%. As a consideration, Merck agrees to sell inventories to Felix during the loan period at a price lower than the prevailing market price of inventories. 1. Prepare the journal entry in Mercks book to record the initial borrowing transaction on January 1, 2019. Show your supporting calculations. 2. Prepare the required journal entries in Mercks book to record the adjustments needed on December 31, 2019 assuming that its total sales to Felix Innovations for the year 2019 is $445,000.
Answer & Explanation
Solved by verified expert
Get Answers to Unlimited Questions
Join us to gain access to millions of questions and expert answers. Enjoy exclusive benefits tailored just for you!
Membership Benefits:
Unlimited Question Access with detailed Answers
Zin AI - 3 Million Words
10 Dall-E 3 Images
20 Plot Generations
Conversation with Dialogue Memory
No Ads, Ever!
Access to Our Best AI Platform: Flex AI - Your personal assistant for all your inquiries!
