Question

Recording a Note Payable OT NOIR Consideration On January 1, 2020. Jet Air Inc. contracted with Systems Plus Inc. to manufacture heavy equipment. Jet Air Inc issued a $22.500 note to Systems Plus Inc in exchange for the equipment that required 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. Account Name Dec 31, 2020

Answer 1

Annual interest (22500*5%) = $1,125
Issue price =[PVA 10%,3*Interest ]+[PVF 10%,3*Face value]
(2.48685*1125)+(0.75131*22500)
$19,702
Date	Account name	Debit	credit
jan 1 2020	Equipment	$       19,702
	Discount on note payable	$         2,798
	Note payable		$       22,500
December 31 2020	Interest expense [19702*10%]	$         1,970
	Discount on note payable		$            845
	cash		$         1,125
December 31 2021	Interest expense   [(19702+845)*10%]	$         2,055
	Discount on note payable		$            930
	cash		$         1,125
December 31 2022	Interest expense   [(19702+845+930)*10%]	$         2,148
	Discount on note payable		$         1,023
	cash		$         1,125
December 31 2022	Note payable	$       22,500
	cash		$       22,500