At the beginning of 2021, VHF Industries acquired a machine with a fair value of $6,774,420 by issuing a four-year, noninterest-bearing note in the face amount of $8 million. The note is payable in four annual installments of $2 million at the end of each year. (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. What is the effective rate of interest implicit in the agreement? 2. to 4. Prepare the necessary journal entries. When recording the issuance of the installment note record it at its net book value in a single note payable (or receivable) account (no Discount). 5. Suppose the market value of the machine was unknown at the time of purchase, but the market rate of interest for notes of similar risk was 12%. Prepare the journal entry to record the purchase of the machine.

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
icon
Related questions
Question
At the beginning of 2021, VHF Industries acquired a machine with a fair value of $6,774,420 by issuing a four-year, noninterest-bearing
note in the face amount of $8 million. The note is payable four annual installments of $2 million at the end of each year. (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. What is the effective rate of interest implicit in the agreement?
2. to 4. Prepare the necessary journal entries. When recording the issuance of the installment note record it at its net book value in a
single note payable (or receivable) account (no Discount).
5. Suppose the market value of the machine was unknown at the time of purchase, but the market rate of interest for notes of similar
risk was 12%. Prepare the journal entry to record the purchase of the machine.
Complete this question by entering your answers in the tabs below.
Required 1
Required 2 to
4
Interest rate
What is the effective rate of interest implicit in the agreement?
Required 5
%
< Required 1
Required 2 to 4 >
Transcribed Image Text:At the beginning of 2021, VHF Industries acquired a machine with a fair value of $6,774,420 by issuing a four-year, noninterest-bearing note in the face amount of $8 million. The note is payable four annual installments of $2 million at the end of each year. (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. What is the effective rate of interest implicit in the agreement? 2. to 4. Prepare the necessary journal entries. When recording the issuance of the installment note record it at its net book value in a single note payable (or receivable) account (no Discount). 5. Suppose the market value of the machine was unknown at the time of purchase, but the market rate of interest for notes of similar risk was 12%. Prepare the journal entry to record the purchase of the machine. Complete this question by entering your answers in the tabs below. Required 1 Required 2 to 4 Interest rate What is the effective rate of interest implicit in the agreement? Required 5 % < Required 1 Required 2 to 4 >
At the beginning of 2021, VHF Industries acquired a machine with a fair value of $6,774,420 by issuing a four-year, noninterest-bearing
note in the face amount of $8 million. The note is payable in four annual installments of $2 million at the end of each year. (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. What is the effective rate of interest implicit in the agreement?
2. to 4. Prepare the necessary journal entries. When recording the issuance of the installment note record it at its net book value in a
single note payable (or receivable) account (no Discount).
5. Suppose the market value of the machine was unknown at the time of purchase, but the market rate of interest for notes of similar
risk was 12%. Prepare the journal entry to record the purchase of the machine.
Complete this question by entering your answers in the tabs below.
Required 1
Required 2 to
4
Required 5
Prepare the necessary journal entries. When recording the issuance of the installment note record it at its net book value in a single note
payable (or receivable) account (no Discount). (If no entries is required for a transaction/event, select "No journal entry required" in the
first account field. When recording the issuance of the installment note record it at its net book value in a single note payable (or
receivable) account (no Discount). Enter your answers in whole dollars.)
View transaction list
1 Record the purchase of the machine.
2 Record the first installment payment at December 31,
2021.
3 Record the second installment payment at December 31,
2022.
EX
*****
Credit
>
Show less
Complete this question by entering your answers in the tabs below.
Required 1
Required 2 to
4
Required 5
Suppose the market value of the equipment was unknown at the time of purchase, but the market rate of interest for notes of similar
risk was 12%. Prepare the journal entry to record the purchase of the equipment. (If no entry is required for a transaction/event, select
"No journal entry required" in the first account field. Enter your answers in whole dollar.)
View transaction list
1 Record the purchase of the machine.
THE
X
Transcribed Image Text:At the beginning of 2021, VHF Industries acquired a machine with a fair value of $6,774,420 by issuing a four-year, noninterest-bearing note in the face amount of $8 million. The note is payable in four annual installments of $2 million at the end of each year. (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. What is the effective rate of interest implicit in the agreement? 2. to 4. Prepare the necessary journal entries. When recording the issuance of the installment note record it at its net book value in a single note payable (or receivable) account (no Discount). 5. Suppose the market value of the machine was unknown at the time of purchase, but the market rate of interest for notes of similar risk was 12%. Prepare the journal entry to record the purchase of the machine. Complete this question by entering your answers in the tabs below. Required 1 Required 2 to 4 Required 5 Prepare the necessary journal entries. When recording the issuance of the installment note record it at its net book value in a single note payable (or receivable) account (no Discount). (If no entries is required for a transaction/event, select "No journal entry required" in the first account field. When recording the issuance of the installment note record it at its net book value in a single note payable (or receivable) account (no Discount). Enter your answers in whole dollars.) View transaction list 1 Record the purchase of the machine. 2 Record the first installment payment at December 31, 2021. 3 Record the second installment payment at December 31, 2022. EX ***** Credit > Show less Complete this question by entering your answers in the tabs below. Required 1 Required 2 to 4 Required 5 Suppose the market value of the equipment was unknown at the time of purchase, but the market rate of interest for notes of similar risk was 12%. Prepare the journal entry to record the purchase of the equipment. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Enter your answers in whole dollar.) View transaction list 1 Record the purchase of the machine. THE X
Expert Solution
trending now

Trending now

This is a popular solution!

steps

Step by step

Solved in 3 steps

Blurred answer
Knowledge Booster
Accounting for Notes
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.
Similar questions
  • SEE MORE QUESTIONS
Recommended textbooks for you
FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
Accounting
ISBN:
9781259964947
Author:
Libby
Publisher:
MCG
Accounting
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis…
Horngren's Cost Accounting: A Managerial Emphasis…
Accounting
ISBN:
9780134475585
Author:
Srikant M. Datar, Madhav V. Rajan
Publisher:
PEARSON
Intermediate Accounting
Intermediate Accounting
Accounting
ISBN:
9781259722660
Author:
J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:
McGraw-Hill Education
Financial and Managerial Accounting
Financial and Managerial Accounting
Accounting
ISBN:
9781259726705
Author:
John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:
McGraw-Hill Education