Question

Recording a Note Payable Issued for Non-Cash Consideration On January 1, 2020, Jet Air Inc. contracted with Systems Plus Inc. to manufacture heavy equipment. Jet Air Inc. issued a $90,000 note to Systems Plus Inc. in exchange for the equipment that required 5% interest payments annually over 3 years on December 31 of each year. Although the fair value of the customized heavy equipment was not reasonably determinable, it was determined that 10% was a reasonable rate of interest for such a transaction. Provide journal entries to be made by Jet Air Inc. at each of the following dates. a. January 1, 2020 ---Date of note issuance. b. December 31, 2020 ---Date of interest payment. December 31, 2021 ---Date of interest payment. d. December 31, 2022 ---Date of interest payment. e. December 31, 2022 ---Date of note payment at maturity. . Note: List multiple debits or credits (when applicable) in alphabetical order. - Note: Round your answer to the nearest whole dollar. - Note: Adjust interest expense in 2022 for any net rounding differences. Cr. 4,500 x 4500 x 90.000 O Date Account Name 2. Jan. 1, 2020 Discount on Nole Payable Equipment Nole Payable b. Dec 31, 2020 Interest Expense Cash Discount on Note Payable c. Dec 31, 2021 Interest Expense Cash Discount on Note Payable d. Dec 31, 2022 Interest Expense Cash Discount on Note Payable e. Dec 31, 2022 Nole Payable Cash < < < < x x OOOOOOOOOOOO x x x x x * Ox Check

Answer 1

Table values are based on:
n=	3
i=	10.0%
Cash Flow	Table Value	Amount	Present Value
PV of Interest	2.48685	$11,191	$27,830
PV of Principal	0.75131	$67,618	$50,802
PV of Notes Payable			$78,632
Discount on Notes =$90,000 - $78,632 =$11,368
Amortization Table-As per effective interest method
Date	Interest Payment($90,000*5%)	Interest expenses(Closing carrying amount*10%)	Discount amorrtization	Closing carrying amount
Col I	Col II	Col III	Col IV(Col III - Col II)	Col V
Jan 1,2020				$                     78,632
Dec 31,2020	$                                                   4,500	$                                                              7,863	$                              3,363	$                     81,995
Dec 31,2021	$                                                   4,500	$                                                              8,200	$                              3,700	$                     85,695
Dec 31,2022	$                                                   4,500	$                                                              8,805	$                              4,305	$                     90,000
Date	Accounts and explanation	Debit(in $)	Credit(in $)
Jan 1,2020	Equipment	$                                                            78,632
	Discount on Notes Payable	$                                                            11,368
	Notes Payable		$                            90,000
Dec 31,2020	Interest expense	$                                                              7,863
	Cash		$                              4,500
	Discount on Notes Payable		$                              3,363
Dec 31,2021	Interest expense	$                                                              8,200
	Cash		$                              4,500
	Discount on Notes Payable		$                              3,700
Dec 31,2022	Interest expense	$                                                              8,805
	Cash		$                              4,500
	Discount on Notes Payable		$                              4,305
Dec 31,2022	Notes Payable	$                                                            90,000
	Cash		$                            90,000