Braxton Technologies, Incorporated, constructed a conveyor for A&G Warehousers that was completed and ready for use on January 1. 2024. • A&G paid for the conveyor by issuing a $150,000, four-year note that specified 4% interest to be paid on December 31 of each year, and the note is to be repaid at the end of four years. • The conveyor was custom-built for A&G, so its cash price was unknown. ● By comparison with similar transactions it was determined that a reasonable interest rate was 12%. Required: 1. Prepare the journal entry for A&G's purchase of the conveyor on January 1, 2024. 2. Prepare an amortization schedule for the four-year term of the note. 3. Prepare the journal entry for A&G's third interest payment on December 31, 2026. 4. If A&G's note had been an installment note to be paid in four equal payments at the end of each year beginning December 31, 2024, what would be the amount of each installment? 5. By considering the installment payment of requirement 4, prepare an amortization schedule for the four-year term of the installment note. 6. Prepare the journal entry for A&G's third installment payment on December 31, 2026. Note: Use tables, Excel, or a financial calculator. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1)
Braxton Technologies, Incorporated, constructed a conveyor for A&G Warehousers that was completed and ready for use on January 1. 2024. • A&G paid for the conveyor by issuing a $150,000, four-year note that specified 4% interest to be paid on December 31 of each year, and the note is to be repaid at the end of four years. • The conveyor was custom-built for A&G, so its cash price was unknown. ● By comparison with similar transactions it was determined that a reasonable interest rate was 12%. Required: 1. Prepare the journal entry for A&G's purchase of the conveyor on January 1, 2024. 2. Prepare an amortization schedule for the four-year term of the note. 3. Prepare the journal entry for A&G's third interest payment on December 31, 2026. 4. If A&G's note had been an installment note to be paid in four equal payments at the end of each year beginning December 31, 2024, what would be the amount of each installment? 5. By considering the installment payment of requirement 4, prepare an amortization schedule for the four-year term of the installment note. 6. Prepare the journal entry for A&G's third installment payment on December 31, 2026. Note: Use tables, Excel, or a financial calculator. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1)
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:Braxton Technologies, Incorporated, constructed a conveyor for A&G Warehousers that was completed and ready for use on January 1,
2024.
●
A&G paid for the conveyor by issuing a $150,000, four-year note that specified 4% interest to be paid on December 31 of each
year, and the note is to be repaid at the end of four years.
• The conveyor was custom-built for A&G, so its cash price was unknown.
●
By comparison with similar transactions it was determined that a reasonable interest rate was 12%.
Required:
1. Prepare the journal entry for A&G's purchase of the conveyor on January 1, 2024.
2. Prepare an amortization schedule for the four-year term of the note.
3. Prepare the journal entry for A&G's third interest payment on December 31, 2026.
4. If A&G's note had been an installment note to be paid in four equal payments at the end of each year beginning December 31,
2024, what would be the amount of each installment?
5. By considering the installment payment of requirement 4, prepare an amortization schedule for the four-year term of the
installment note.
6. Prepare the journal entry for A&G's third installment payment on December 31, 2026.
Note: Use tables, Excel, or a financial calculator. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1)
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Step 1: Meaning on interest on notes payable and amortization schedule
VIEWStep 2: Journal entries for A&G purchase of the conveyor on 1Jan 2024
VIEWStep 3: Amortization schedule for the four year term of lease
VIEWStep 4: Journal entries for AAG third year interest payment on December31,2026
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