1.

Lakanjowa Corporation
(a) Net Method
Dec. 16 Purchases 64,680
Freight-In 1,400
Accounts Payable 64,680
Cash 1,400

Dec. 19 Purchases 68,443.20

Accounts Payable 68,443.20

Dec. 26 Accounts Payable 64,680

Cash 64,680

Dec. 31 Accounts Payable 68,443.20

Purchase Discount
Lost 2,116.80
Cash 70,560

(b) Adjusting entry if not paid on Dec. 31

Purchase Discount
Lost 3,556.80
Accounts payable 3,556.80

2. Roque Corporation
(a) Journal Entries

June 1,2017 Cash 1,080,000

Discount on Notes
Payable 120,000
Notes Payable 1,200,000

Dec. 31, 2017 Interest Expense 70,000

Discount on Notes
Payable 70,000

May 1,2018 Interest Expense 50,000

Discount on Notes
Payable 50,000

Notes Payable 1,200,000

Cash 1,200,000

(b) Carrying Value of the Liability

Notes Payable 1,200,000
Discount on Notes
Payable -50,000
(120,000-70,000)
 Amortized Cost 1,150,000
of Notes Payable
3. (a)The market rate of interest for a note of this type is 5%

May 1,2016 Equipment 8,304,928

Notes Payable 8,000,000
Premium on Notes
Payable 304,928

Dec. 31,2016 Premium on Notes

Payable 203,285
Interest Expense 276,715
Interest Payable 480,000

April 30,2017 Notes Payable 8,000,000

Interest Payable 480,000
Interest Expense 240,000
Cash 8,720,000

Premium on Notes
Payable 101,643
Interest Expense 101,643

* Total Liability on Dec. 31 2016

Notes Payable 8,000,000
Premium on Notes
Payable 101,643
Interest Payable 480,000
Total 8,581,643

(b) The market rate of interest for a note of this type is 12%

May 1,2016 Equipment 7,768,088

Discount on Notes
Payable 213,912
Notes Payable 8,000,000

Dec.31,2016 Interest Expense 622,887

Interest Payable 480,000
Discount on Notes
Payable 142,887

April 30,2017 Notes Payable 8,000,000

Interest Payable 480,000
Interest Expense 240,000
Cash 8,720,000

Interest Expense 71,025

 Discount on Notes
Payable 71,025

* Total Liability on Dec. 31, 2016

Notes Payable 8,000,000

Interest Payable 480,000
Discount on Notes
Payable -71,025
Total 8,408,975