E 10-9 Acquisition cost; noninterest-bearing note LO3 On January 1, 2013, Byner Company purchased a used tractor. Byner paid $5,000 down and signed a noninterest-bearing note requiring $25,000 to be paid on December 31, 2015. The fair value of the tractor is not determinable. An interest rate of 10% properly reflects the time value of money for this type of loan agreement. The company's financial year-end is December 31. Required: 1. Prepare the journal entry to record the acquisition of the tractor. Round computations to the nearest dollar. 2. How much interest expense will the company include in its 2013 and 2014 income statements for this note? 3. What is the amount of the liability the company will report in its 2013 and 2014 statements of financial position for this note?
E 10-9 Acquisition cost; noninterest-bearing note LO3 On January 1, 2013, Byner Company purchased a used tractor. Byner paid $5,000 down and signed a noninterest-bearing note requiring $25,000 to be paid on December 31, 2015. The fair value of the tractor is not determinable. An interest rate of 10% properly reflects the time value of money for this type of loan agreement. The company's financial year-end is December 31. Required: 1. Prepare the journal entry to record the acquisition of the tractor. Round computations to the nearest dollar. 2. How much interest expense will the company include in its 2013 and 2014 income statements for this note? 3. What is the amount of the liability the company will report in its 2013 and 2014 statements of financial position for this note?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Question
Transcribed Image Text:E 10-9
Acquisition cost;
noninterest-bearing
note
LO3
On January 1, 2013, Byner Company purchased a used tractor. Byner paid $5,000 down and signed a
noninterest-bearing note requiring $25,000 to be paid on December 31, 2015. The fair value of the tractor is not
determinable. An interest rate of 10% properly reflects the time value of money for this type of loan agreement.
The company's financial year-end is December 31.
Required:
1. Prepare the journal entry to record the acquisition of the tractor. Round computations to the nearest dollar.
2. How much interest expense will the company include in its 2013 and 2014 income statements for this note?
3. What is the amount of the liability the company will report in its 2013 and 2014 statements of financial
position for this note?
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
Step by step
Solved in 3 steps with 6 images
Recommended textbooks for you
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis…
Accounting
ISBN:
9780134475585
Author:
Srikant M. Datar, Madhav V. Rajan
Publisher:
PEARSON
Intermediate Accounting
Accounting
ISBN:
9781259722660
Author:
J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:
McGraw-Hill Education
Financial and Managerial Accounting
Accounting
ISBN:
9781259726705
Author:
John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:
McGraw-Hill Education