On 1 July 2013 Bryson Plc Sells a Machine to Adams

question 4

Multiple Choice

On 1 July 2013 Bryson Plc sells a machine to Adams Plc in exchange for a promissory note that requires Adams Plc to make five payments of €8000,the first to be made on 30 June 2014.The machine cost Bryson Plc €20 000 to manufacture.Bryson Plc would normally sell this type of machine for €30 326 for cash or short-term credit.The implicit interest rate in the agreement is 10%.What are the appropriate journal entries to record the sale agreement and the first two instalments using the net-interest method?

• A) \(\begin{array}{|c|l|l|l|}
• \hline 1 \text { July } 2013 & & \\
• \hline \mathrm{Dr} & \text { Note receivable } &40000 & \\
• \hline \mathrm{Cr} & \text { Sales } & &40000 \\
• \hline & && \\
• \hline \mathrm{Dr} & \text { Cost of sales } & 20000& \\
• \hline \mathrm{Cr} & \text { Inventory }&&20000\\
• \hline & && \\
• \hline {\text { J0 June } 2014} & & \\
• \hline \mathrm{Dr} & \text { Cash } & 8000 & \\
• \hline \mathrm{Cr} & \text { Note receivable } & & 8000 \\
• \hline & & & \\
• \hline 30 \text { June } 2015 & & \\
• \hline \mathrm{Dr} & \text { Cash } &8000 & \\
• \hline \mathrm{Cr} & \text { Note receivable } & &8000\\
• \hline
• \end{array}\)
• B) \(\begin{array}{|c|l|r|r|}
• \hline {\text { July } 2013} & \\
• \hline \mathrm{Dr} & \text { Note receivable } & 30326 & \\
• \hline \mathrm{Cr} & \text { Sales } & & 30326 \\
• \hline & & & \\
• \hline \mathrm{Dr} & \text { Cost of sales } & 20000 & \\
• \hline \mathrm{Cr} & \text { Inventory } & & 20000 \\
• \hline\\
• \hline 30 \text { June } 2014 & & \\
• \hline \mathrm{Dr} & \text { Cash } & 8000 & \\
• \hline \mathrm{Cr} & \text { Note receivable } & & 4967 \\
• \hline \mathrm{Cr} & \text { Interest revenue } & & 3033 \\
• \hline\\
• \hline {30 \text { June } 2015} & & \\
• \hline \mathrm{Dr} & \text { Cash } & 8000 & \\
• \hline \mathrm{Cr} & \text { Note receivable } & & 5464 \\
• \hline \mathrm{Cr} & \text { Interest revenue } & & 2536 \\
• \hline
• \end{array}\)
• C) \(\begin{array}{|c|l|r|r|}
• \hline 1 \text { July } 2013 \\
• \hline \mathrm{Dr} & \text { Note receivable } & 20000 & \\
• \hline \mathrm{Cr} & \text { Sales } & & 20000 \\
• \hline & & & \\
• \hline 30 \text { June } 2014 & & \\
• \hline \mathrm{Dr} & \text { Cash } &8000 & \\
• \hline \mathrm{Cr} & \text { Note receivable } & & 2000\\
• \hline \mathrm{Cr} & \text { Interest revenue } & & 6000\\
• \hline\\
• \hline 30 \text { June } 2015 & & \\
• \hline \mathrm{Dr} & \text { Cash } & 8000 & \\
• \hline \mathrm{Cr} & \text { Note receivable } & & 1800 \\
• \hline \mathrm{Cr} & \text { Interest revenue } & & 6200 \\
• \hline
• \end{array}\)
• D) \(\begin{array}{l}
• 1 \text { July } 2013\\
• \begin{array}{|l|l|l|l|}
• \hline \mathrm{Dr} & \text { Note receivable } & 30326 & \\
• \hline \mathrm{Cr} & \text { Sales } & & 30326 \\
• \hline & & & \\
• \hline \mathrm{Dr} & \text { Cost of sales } & 20000 & \\
• \hline \mathrm{Cr} & \text { Inventory } & & 20000 \\
• \hline\\
• \hline{30 \text { June } 2014} & & \\
• \hline \mathrm{Dr} & \text { Cash } & 8000 & \\
• \hline \mathrm{Cr} & \text { Interest revenue } & & 4967 \\
• \hline \mathrm{Cr} & \text { Note receivable } & & 3033 \\
• \hline\\
• \hline 30 \text { June } 2015 & & \\
• \hline \mathrm{Dr} & \text { Cash } & 8000 & \\
• \hline \mathrm{Cr} & \text { Interest revenue } & & 5464 \\
• \hline \mathrm{Cr} & \text { Note receivable } & & 2536 \\
• \hline
• \end{array}
• \end{array}\)

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Definitions:

Foreign Corporation

A company that is registered and operates in a country different from the country where it was incorporated, subject to the laws and regulations of the host country.

Insurance

A financial product that transfers the risk of financial loss from an individual or entity to an insurance company in exchange for premium payments.

Treasury Bond

A Treasury bond is a long-term, fixed-interest government debt security issued by the U.S. Treasury Department with a maturity of more than 10 years.

Singapore

An island city-state in Southeast Asia, known for its strong economy, diverse culture, and strict regulations.