Question

Check my work Dharma, a public company, sold a piece of equipment at the beginning of Year 1, receiving a $23,000, two-year 1% note. Interest is paid at the end of each year. Market interest rates are assumed to be 10%. (PV of $1. PVA of $1, and PVAD of $1.) (Use appropriate factor(s) from the tables provided.) Required: 1. Calculate the present value of the note receivable. (Round time value factor to 5 decimal places. Round Intermediate and final answer to the nearest whole dollar amount.) Present value $ 19,407 2. Prepare entries for the sale, interest revenue, and cash collection each year for two years. (If no entry is required for a transaction/event, select "No Journal entry required in the first account field. Round time value factor to 5 decimal places. Round Intermediate and final answer to the nearest whole dollar amount.) View transaction list Journal entry worksheet < 1 2 3 Record the sale and note receivable.

Answer 1

B11 2 C D E F G 1 $23,000 face value of note 2 $230 annual interest 3 present value annuity factor (10%, 2 periods) 4 1.73554 present value factor (10%, 2 periods) 5 0.82645 6 present value of interest receipts $399 7 $19,008 present value of face value of note 8 $19,407 present value of note 1 10 account titles and explanation 11 date debit credit 2. 12 1 Jan, year 1note receivable $19,407 13 $19,407 14 equipment (to record sale of equipment) 15 16 31 Dec, year 1 cash $230 17 note receivable $1,711 18 $1,941 interest revenue 19 |(to record receipt of interest) 20 21 31 Dec, year 2 cash $23,000 22 $21,118 note receivable 23 $1,882 interest revenue 24 (to record receipt of interest and note receivable) 25 26 27 st Ln

for formulas and calculations, refer to the image below -

В11 2 А C D E F G 1 23000 face value of note 2 annual interest -23000*1% -ROUND(-PV(10 %,2, 1),5) -ROUND(-PV(10 %,2,0,1) ,5) present value annuity factor (10%, 2 periods) present value factor (10%, 2 periods) 5 6 =ROUND(E3*E4,0) =ROUND(E2*E5,0) -SUM(E7:E8) present value of interest receipts 7 present value of face value of note present value of note 1 9 10 account titles and explanation 11 date debit credit 2 12 1 Jan, year 1 note receivable -E9 13 equipment -E9 14 (to record sale of equipment) 15 16 31 Dec, year 1 cash 17 ЕЕЗ note receivable -F19-E17 18 |=ROUND(E9*10%,0) interest revenue 19 |(to record receipt of interest) 20 21 - 23000 31 Dec, year 2 cash 22 -E13+E18 note receivable 23 interest revenue -E22-F23 24 (to record receipt of interest and note receivable) 25 26 27 LL st LO

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