On June 1, 2017, Santos Furniture Co. borrowed P5,000,000 (face value) from Sonic Co., a major customer, through a non-interest-bearing note due in 4 years. Because the note was non-interest-bearing, Santos Furniture agreed to sell furniture to this customer at lower than market price. A 10% rate of interest is normally charged on this type of loan. Prepare the journal entry to record this transaction and determine the amount of interest expense to report for 2017.

On June 1, 2017, Santos Furniture Co. borrowed P5,000,000 (face value) from Sonic Co., a major customer, through a non-interest-bearing note due in 4 years. Because the note was non-interest-bearing, Santos Furniture agreed to sell furniture to this customer at lower than market price. A 10% rate of interest is normally charged on this type of loan. Prepare the journal entry to record this transaction and determine the amount of interest expense to report for 2017.

Financial Accounting

14th Edition

ISBN:9781305088436

Author:Carl Warren, Jim Reeve, Jonathan Duchac

Publisher:Carl Warren, Jim Reeve, Jonathan Duchac

Chapter14: Long-term Liabilities: Bonds And Notes

Section: Chapter Questions

Problem 11E

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