On December 31, 2015 the Neptune Corporation acquired acustom-made plant asset by issuing a promissory note with a face value of $ 1,200,000, a due date of December 31, 2022 and a stated (coupon) rate of interest of 6%. Interest is compounded annually and is payable at the end on each year. The fair value of the customized asset is not readily determinable and the note receivable is not publicly traded. Given the company's incremental borrowing rate and current market conditions, the imputed rate of interest for the note is estimated as 8%. Determine the present value of the note and prepare the journal entry to record the transaction for Neptune Corporation.
On December 31, 2015 the Neptune Corporation acquired acustom-made plant asset by issuing a promissory note with a face value of $ 1,200,000, a due date of December 31, 2022 and a stated (coupon) rate of interest of 6%. Interest is compounded annually and is payable at the end on each year. The fair value of the customized asset is not readily determinable and the note receivable is not publicly traded. Given the company's incremental borrowing rate and current market conditions, the imputed rate of interest for the note is estimated as 8%. Determine the present value of the note and prepare the journal entry to record the transaction for Neptune Corporation.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Question
On December 31, 2015 the Neptune Corporation acquired acustom-made plant asset by issuing a promissory note with a face value of $ 1,200,000, a due date of December 31, 2022 and a stated (coupon) rate of interest of 6%.
Interest is compounded annually and is payable at the end on each year. The fair value of the customized asset is not readily determinable and the note receivable is not publicly traded. Given the company's incremental borrowing rate and current market conditions, the imputed rate of interest for the note is estimated as 8%.
Determine the present value of the note and prepare the
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 2 steps with 1 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