Requirement 1:
Date | Account title and Explanation | Debit | Credit |
Jan 1,2021 | Tractor | $23,788 | |
Discount on bonds payable | $7,212 | ||
Cash | $2,000 | ||
Notes payable | $29,000 | ||
[To record acquisition of the tractor] |
Calculations:
Down payment | $2,000 |
Present value of the note | $21,788 |
[$29,000 x 0.75131 present value factor (10%, 3 years)] | |
Cost of the tractor | $23,788 |
Requirement 2:
i.Interest expense for 2021 = Carrying value of the note on Jan 1,2021 x 10%
= $23,788 x 10%
= $2,178.80
ii. Interest expense for 2022 = Carrying value of the note on Jan 1,2022 x 10%
= ($23,788+$2,178.80) x 10%
=$2,396.68
Requirement 3:
Liability to be report at the end of the period,
i.For 2021 = Carrying value of the note on Jan 1,2021 + Interest expense for 2021
= $21,788 + $2,178.8
= $23,966.8
ii.For 2022 = Carrying value of the note on Jan 1,2022 + Interest expense for 2022
=$23,966.8 + $2,396.68
= $26,363.48
On January 1, 2021, Byner Company purchased a used tractor. Byner pald $2,000 down and signed...
On January 1, 2021, Byner Company purchased a used tractor. Byner paid $4,000 down and signed a noninterest-bearing note requiring $33,000 to be paid on December 31, 2023. The fair value of the tractor is not determinable. An interest rate of 12% properly reflects the time value of money for this type of loan agreement. The company’s fiscal year-end is December 31. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of...
On January 1, 2018, Byner Company purchased a used tractor. Byner paid $4,000 down and signed a noninterest-bearing note requiring $28,000 to be paid on December 31, 2020. The fair value of the tractor is not determinable. An interest rate of 12% properly reflects the time value of money for this type of loan agreement. The company’s fiscal year-end is December 31. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of...
Check my work On January 1, 2018, Byner Company purchased a used tractor. Byner paid $2,000 down and signed a noninterest-bearing note requiring $29,000 to be paid on December 31, 2020. The fair value of the tactor is not determinable. An interest rate of 10% popery reflects the time value of money for this type of loan agreement. The company's fiscal year-end is December 31. (EV of $1. PV of $1 FVA of $1. PVA of $1, EVAD of $1...
At January 1, 2021, Brant Cargo acquired equipment by issuing a four-year, $150,000 (payable at maturity), 6% note. The market rate of interest for notes of similar risk is 12%. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1 (Use appropriate factor(s) from the tables provided.) Required: 1. to 3. Prepare the necessary journal entries for Brant Cargo. (If no entry is required for a transaction/event, select "No journal entry...
Blanton Plastics, a household plastic product manufacturer, borrowed $28 million cash on October 1, 2021, to provide working capital for year-end production. Blanton issued a four-month, 12% promissory note to L&T Bank under a prearranged short-term line of credit. Interest on the note was payable at maturity. Each firm's fiscal period is the calendar year. Required: 1. Prepare the journal entries to record (a) the issuance of the note by Blanton Plastics and (b) L&T Bank's receivable on October 1,...
On January 1, 2021, Darnell Window and Pane issued $18.9 million of 10-year, zero-coupon bonds for $7,286,768. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) (Use appropriate factor(s) from the tables provided.) Required: 2. Determine the effective rate of interest. 1. & 3. to 5. Prepare the necessary journal entries. Complete this question by entering your answers in the tabs below. Interest rate General Journal Determine the effective rate...
When Patey Pontoons issued 8% bonds on January 1, 2021, with a face amount of $540,000, the market yield for bonds of similar risk and maturity was 11%. The bonds mature December 31, 2024 (4 years). Interest is paid semiannually on June 30 and December 31. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) (Use appropriate factor(s) from the tables provided.) Required: 1. Determine the price of the bonds...
When Patey Pontoons issued 4% bonds on January 1, 2021, with a face amount of $660,000, the market yield for bonds of similar risk and maturity was 5%. The bonds mature December 31, 2024 (4 years). Interest is paid semiannually on June 30 and December 31. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) (Use appropriate factor(s) from the tables provided.) Required: 1. Determine the price of the bonds...
At January 1, 2021, Brant Cargo acquired equipment by issuing a four-year, $250,000 (payable at maturity), 6% note. The market rate of interest for notes of similar risk is 12%. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) (Use appropriate factor(s) from the tables provided.) Required: 1. to 3. Prepare the necessary journal entries for Brant Cargo. (If no entry is required for a transaction/event, select "No journal entry...
On January 1, 2021, Bishop Company issued 8% bonds dated January 1, 2021, with a face amount of $21.0 million. The bonds mature in 2030 (10 years). For bonds of similar risk and maturity, the market yield is 10%. Interest is paid semiannually on June 30 and December 31. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) (Use appropriate factor(s) from the tables provided. Round your intermediate calculations to...