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21. On January 1, Big Red Corporation paid for equipment by issuing a $300,000, 3 year note that specified 2% interest to be paid on December 31 of each year. The equipment's retail cash price was unknown, but it was determined that a reasonable interest rate was 5%. At what amount should Big Red record the equipment and the note? A. $300,000 B. $275,492 C. $324,508 D. Cannot be determined

21. On January 1, Big Red Corporation paid for equipment by issuing a $300,000, 3 year note that specified 2% interest to be paid on December 31 of each year. The equipment's retail cash price was unknown, but it was determined that a reasonable interest rate was 5%. At what amount should Big Red record the equipment and the note? A. $300,000 B. $275,492 C. $324,508 D. Cannot be determined

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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21. On January 1, Big Red Corporation paid for equipment by issuing a $300,000, 3 year note that specified 2% interest to be paid on December 31 of each year. The equipment's retail cash price was unknown, but it was determined that a reasonable interest rate was 5%. At what amount should Big Red record the equipment and the note? A. $300,000 B. $275,492 C. $324,508 D. Cannot be determined
Transcribed Image Text:21. On January 1, Big Red Corporation paid for equipment by issuing a $300,000, 3 year note that specified 2% interest to be paid on December 31 of each year. The equipment's retail cash price was unknown, but it was determined that a reasonable interest rate was 5%. At what amount should Big Red record the equipment and the note? A. $300,000 B. $275,492 C. $324,508 D. Cannot be determined
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