Question

On January 1 Snipes Construction paid for earth moving equipment by issuing a $390,000, 2-vear note that specified 2% interest to be paid on December 31 of each year. The equipment's retail cash price was unknown, but it was determined that a reasonable interest rate was 5% FV of S1, PV of $1. EVA of $1. PVA 51. EVAD of S1 and PVAD of S1 (Use appropriate factor(s) from the tables provided.) At what amount should Snipes record the equipment and the note? What journal entry should it record for the transaction? Complete this question by entering your answers in the General Price of Equipment whole dollars, if no entry is require References What journal entry should it record for the transaction? (Round your answers to the transaction/event, select "No journal entry required in the first account field Vwrw transaction list Journal entry worksheet Record the issue of note payable for equipment purchase. otenter debts before on SALE Debit III ILI ITIL Type here to search O

Answer 1

Debit 18). Credit() I solutions : Journal Entry Event General Journal 1 Equipment Discount on notes payableê Notes. payable(face amount). (to record equipment purchased by issuing notes payable) $368,234 $ 21,766 $390,000 Explanation -.. D calculation of Equipment amount: Interest [15390,000x91, X1.8595 Principle ($390.000 40.9070) present value (price of equipment) of the note pasable Amount(s) $14,504 $353,730 $368,234. .

Note's 1) present value of an ordinary .. annuity of $1; 022; 1=5%. = 1 = 1.8595 2) present value of $1; 0:2; 1= 5%=0.9070

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