Solution:
Fair value of computer = Down payment + Present value of installments
= $37,200 + $18,600 * Cumulative PV factor at 8% for 5 periods
= $37,200 + $18,600 * 3.99271
= $111,464.41
Journal Entries - Martinez Corporation | |||
Date | Particulars | Debit | Credit |
31-Dec-19 | Equipment Dr | $111,464.41 | |
Discount on notes payable Dr | $18,735.59 | ||
To Cash | $37,200.00 | ||
To Notes Payable | $93,000.00 | ||
(To record purchase of equipment by issue of note) | |||
31-Dec-20 | Notes Payable Dr | $18,600.00 | |
Interest expense Dr ($74,264.41*8%) | $5,941.15 | ||
To Cash | $18,600.00 | ||
To Discount on notes payable | $5,941.15 | ||
(To record installation payment) | |||
31-Dec-21 | Notes Payable Dr | $18,600.00 | |
Interest expense Dr ($61,605.56*8%) | $4,928.44 | ||
To Cash | $18,600.00 | ||
To Discount on notes payable | $4,928.44 | ||
(To record installation payment) |
Exercise 10-15 Martinez Corporation purchased a computer on December 31, 2019, for $130,200, paying $37,200 down...
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