Legendary Corporation purchased equipment and in exchange signed a three-year promissorynote. The note requires Legendary to make equal annual payments of $10,000 at the end of each ofthe next three years. Legendary has other promissory notes that charge interest at the annual rateof 6 percent.Required:1. Compute the present value of the note, rounded to the nearest dollar, using Legendary’s typical interest rate of 6 percent.2. Show the journal entry to record the equipment purchase (round to the nearest dollar).TIP: Record the liability as a Note Payable.3. Show the journal entry at the end of the first year to record the first payment of $10,000.4. Show the journal entry at the end of the second year to record the second payment of $10,000.5. Show the journal entry at the end of the third year to record the third payment of $10,000.
Legendary Corporation purchased equipment and in exchange signed a three-year promissory
note. The note requires Legendary to make equal annual payments of $10,000 at the end of each of
the next three years. Legendary has other promissory notes that charge interest at the annual rate
of 6 percent.
Required:
1. Compute the present value of the note, rounded to the nearest dollar, using Legendary’s typical interest rate of 6 percent.
2. Show the
TIP: Record the liability as a Note Payable.
3. Show the journal entry at the end of the first year to record the first payment of $10,000.
4. Show the journal entry at the end of the second year to record the second payment of $10,000.
5. Show the journal entry at the end of the third year to record the third payment of $10,000.
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