On January 2, 2016, Jenga Company purchased new manufacturing equipment. They paid $50,000 as a down...

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On January 2, 2016, Jenga Company purchased new manufacturing equipment. They paid $50,000 as a down payment and issued a lon

business accounting

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Answer 1

Answer #1

Semiannual Payment = $35,000
Annual Interest Rate = 4.00%
Semiannual Interest Rate = 2.00%
Number of Payments = 10

Present Value of Note = $35,000 * PVA of $1 (2.00%, 10)
Present Value of Note = $35,000 * 8.98259
Present Value of Note = $314,391

June 30, 2016:

Beginning Carrying Value = $314,391

Interest Expense = 2.00% * $314,391
Interest Expense = $6,288

Principal Repayment = $35,000 - $6,288
Principal Repayment = $28,712

Ending Carrying Value = $314,391 - $28,712
Ending Carrying Value = $285,679

December 31, 2016:

Beginning Carrying Value = $285,679

Interest Expense = 2.00% * $285,679
Interest Expense = $5,714

So, Jenga will record interest expense of $5,714 with the second interest payment on December 31, 2016.

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Answer 2

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