Part C - Long Questions (Total 30 marks)
1 Question @30 marks each
Question 1 (30 marks)
Spacing Corporation is now in the process of preparing the annual financial reports for the year ended December 31, 2020. The following is a list
of transactions involving receivables that occurred during 2020:
• On March 30, 2020. Spacing Corporation loaned an officer of the company $20,000 and received a note requiring principal and interest at 7%
to be paid on March 30, 2022.
• Spacing Corporation discounted the $20,000 note at a local bank on May 30, 2020. The bank's discount rate is 8%. The note was discounted
without recourse and the sale criteria are met.
• On August 31, 2020, Spacing Corporation sold stock in a nonpublic company with a book value of $5,000 and accepted a $6,000 noninterest-
bearing note with a discount rate of 8%. The $6,000 payment is due on February 28, 2022. The stock has no ready market value.
Required:
Prepare journal entries for each of the above transactions and the necessary year-end adjusting entries (round all calculations to the nearest
dollar). Narrative note is not required.