Question

On January 1, Snipes Construction paid for earth-moving equipment by issuing a $330,000, 4-year 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%. (EV of $1. PV of $1. EVA of $1. PVA of $1. EVAD of $1 and PVAD of $1) (Use appropriate factor(s) from the tables provided.) At what amount should Snipes record the equipment and the note? Complete this question by entering your answers in the tabs below. Price of Equipment General Journal At what amount should Snipes record the equipment and the note? (Round your answers to the nearest whole dollars.) Table values are based on: n Present Value Amount Loan repayments Interest Principal Price of equipment General Journal

Answer 1

Price of equipment is

Table values are based on:
n = 4
i = 5%
Cash Flow	Table Value	Amount	Present Value
Interest	3.546	6,600	23,403
Principal	0.823	330,000	271,492
Price of equipment			294,895

Issue of Notes Payable is:

Year	Particulars	L.F	Debit ($)	Credit ($)
Jan-01	Equipment		294,895
	Discount on Notes Payable		35,105
	Notes Payable			330,000
	(For notes issued at discount)