On January 1, 2016 Karel Corp. purchased a machine having a fair market value of $53,132...
On January 1, 2016 Karel Corp. purchased a machine having a fair market value of $53,132 by issuing a four-year non-interest bearing $75,000 note.
Prepare the journal entry to record the purchase and then calculate the book value of this note at fiscal year-end 2016. (Use EFFECTIVE INTEREST and show your amortization table).
I saw this is already posted with an answer, but I am looking for an alternate answer as I do not think the other one is correct.
Homework Answers
Face Value of Note = $75,000
Present Value of Note = $53,132
Time Period = 4 years
Let Interest Rate on Note be i%
$53,132 = $75,000 * PV of $1 (i%, 4)
PV of $1 (i%, 4) = 0.70843
Using table values or financial calculator, i = 9%
Interest Rate = 9%
Amortization table:
Journal Entry to record purchase of equipment:
Book Value of Note at December 31, 216 = $57,914
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On January 1, 2016 Karel Corp. purchased a machine having a fair
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