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Calculate the value of the purchase

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Question: Winter Corporation sold inventory with an original cost of $50,000 to Fall Limited on January 1, 20X15. In exchange for the inventory, it received a two year, $90,000 note with interest of 5% to be paid on December 31 each year. The market rate of interest is 9%. Winter used a perpetual inventory system.

For Winter Company:

1. Calculate the value of the sale.

2. Give all of the appropriate entries throughout the term of the note receivable, using the gross method and the effective interest method.

For Fall Company:

1. Calculate the value of the purchase.

2. Give all of the appropriate entries throughout the term of the note payable, using the gross method and the effective interest method

Reference no: EM132764716

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