Flint Corporation is in the business of selling cattle. Due to recent diseases plaguing cattle, Flint...
Flint Corporation is in the business of selling cattle. Due to recent diseases plaguing cattle, Flint is experiencing a cash shortage. Flint issued a $319,200, 6-year, zero-interest-bearing note to Little Town Corp. on January 1, 2020, and received $228,000 cash. In addition, to conserve cash, Flint agreed to sell cattle to Little Town for an amount less than the regular selling price over the 6-year period. The market interest rate for similar notes is 8%. Flint uses the effective interest method.
(a) Calculate the present value of the note on January 1 using (1) a financial calculator or (2) Excel function PV.
| Present value of the note | $ |
(b) Prepare Flint’s January 1 journal entry.
|
Date |
Account Titles and Explanation |
Debit |
Credit |
|
Jan. 1, 2020 |
|||
Homework Answers
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