On December 31, 2020, Pearl Limited acquired a machine from Pronghorn Corporation by issuing a $520,000, non–interest-bearing note that is payable in full on December 31, 2024. The company’s credit rating permits it to borrow funds from its several lines of credit at 10%. The machine is expected to have a five-year life and a $80,000 residual value. Click here to view the factor table PRESENT VALUE OF 1. Click here to view the factor table PRESENT VALUE OF AN ANNUITY OF 1. Using (1) factor tables, (2) a financial calculator, or (3) Excel function PV, calculate the value of the note and prepare the journal entry for the purchase on December 31, 2020.
On December 31, 2020, Pearl Limited acquired a machine from Pronghorn Corporation by issuing a $520,000, non–interest-bearing note that is payable in full on December 31, 2024. The company’s credit rating permits it to borrow funds from its several lines of credit at 10%. The machine is expected to have a five-year life and a $80,000 residual value. Click here to view the factor table PRESENT VALUE OF 1. Click here to view the factor table PRESENT VALUE OF AN ANNUITY OF 1. Using (1) factor tables, (2) a financial calculator, or (3) Excel function PV, calculate the value of the note and prepare the journal entry for the purchase on December 31, 2020.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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On December 31, 2020, Pearl Limited acquired a machine from Pronghorn Corporation by issuing a $520,000, non–interest-bearing note that is payable in full on December 31, 2024. The company’s credit rating permits it to borrow funds from its several lines of credit at 10%. The machine is expected to have a five-year life and a $80,000 residual value.
Click here to view the factor table PRESENT VALUE OF 1.
Click here to view the factor table PRESENT VALUE OF AN ANNUITY OF 1.
Click here to view the factor table PRESENT VALUE OF 1.
Click here to view the factor table PRESENT VALUE OF AN ANNUITY OF 1.
Using (1) factor tables, (2) a financial calculator, or (3) Excel function PV, calculate the value of the note and prepare the journal entry for the purchase on December 31, 2020. (Hint: Refer to Chapter 3 for tips on calculating and use the amount arrived at by using the time value of money tables for the journal entry.)
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