On February 1, 20x1, TSR Co. sold machinery with historical cost of P3,000,000 and accumulateddepreciation of P900,000 in exchange for a 3-year, P2,100,000 noninterest-bearing note receivable duein equal semi-annual payments every August 1 and February 1 starting on August 1, 20x1. Theprevailing rate of interest for this type of note is 10%. How much is the interest income in 20x2?

A debt with no stated interest rate is known as a noninterest-bearing note. However, a…

Answered: On February 1, 20x1, TSR Co. sold…

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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A company sold goods to a customer in exchange for a 5-year, zero-interest-bearing note on January 1, 2021. The note has a face amount of $244,000. The company imputes a 10% interest rate on this zero-interest note transaction. Present value factor for 10% and 5 years, single sum is 0.62. What is the sales revenue the company should record related to this transaction? (Please do not use your own present value tables or financial calculator.) (Please do not round your answer in any part of the computation.)
On January 1, 2024, the Ward Company purchased land from the Fisher Company in exchange for a $1,000,000 face value noninterest-bearing note payable, due in five equal installments of $200,000, with the first payment due December 31, 2024. The face value of the note includes interest and principal. There was no established interest rate for this note but the prevailing interest rate for similar notes is 12% APR. Present value factors from tables are listed below: Present value of single sum, 5 periods, 12% Present value of ordinary annuity, 5 periods, 12% Present value of annuity due, 5 periods, 12% Future value of single sum, 5 periods, 12% 0.56743 3.60478 4.03735 1.76234 Future value of ordinary annuity, 5 periods, 12% 6.35285 Instructions: Prepare the journal entries to record: (A) the issuance of the note payable on January 1, 2024, and (B) the first payment on December 31, 2024 and any amortization, assuming the effective interest rate method is used.
A 7-year, $5,000 promissory note bearing interest at j12-7.20% was sold to a buyer after 2 years. The buyer purchased the note at a price that would yield them j4=6.00%. a) Calculate the maturity value of the note: b) Calculate the price the buyer paid (at the 2 year mark): c) What rate did the original holder of the note earn over the 2 year period that they held it? Express your answer as an annual effective rate (j1) to 2 decimal places. Do not include the % symbol.
On January 1, 2025, Shetland Company loans $252,510 to Durham Corporation in exchange for a $300,000 zero-interest-bearing note payable in 2 years. The market rate of interest for a transaction of this nature for Durham is 9%. The present value of 1, 2 years out at 9% is 0.8417. Shetland Company has a calendar year-end and it uses the effective-interest method. (a) Prepare journal entries on 1/1/25 to recognize the loan for Shetland Company (b) Prepare the journal entry to recognize interest on 12/31/25 for Shetland Company. (c) Prepare the journal entry to recognize interest on 12/31/26 for Shetland Company. (d) Prepare the journal entry to recognize receipt of payment of the note on 01/01/2027 for Shetland Company.
BBY Company loaned $66,116 to Orwell, Inc, accepting Orwell's 2-year, $80,000, zero-interest-bearing note. The implied interest rate is 10%. Prepare BBY's journal entries for the initial transaction, recognition of interest each year, and the collection of $80,000 at maturity. Debit - Notes Receivable $80,000 Credit - Credit - Cash Debit - Credit - Debit - Credit - Interest Revenue 6.026 DEC 16 618 10
During your review of the records of X factor corporation for the year 20A, you noticed that X factor sold a machine with a carrying amount of 640,000 (cost is 1,600,000) on June 30,20A. X Factor received an 800,000 non-interest bearing note due in 3 years. There is no established market value for the machine. The yield rate for this type of note is 12%. X factor recorded the transaction by debiting Note Receivable for 800,000 and crediting machinery for 640,000 and gain on sale for the difference. The transaction has resulted to a gain or loss on sale of (indicate gain or loss in your answer after the amount)
On January 1, 2018, Apple Company sold delivery equipment costing P1,000,000 with accumulated depreciation of P150,000 in exchange for a 3-year, P1,800,000 noninterest bearing note receivable due on December 31, 2020. The prevailing market rate of interest for this type of note is 12%. How much is the gain or loss on sale of delivery equipment in 2018?
Harper Co. funds the acquisition of equipment on January 1, year 8 by issuing a $15,000 non-interest-bearing note payable. Beginning on December 31, year 8, the debt will be paid off in ten equal yearly payments. The market rate of interest for this sort of note is 5%. Given the facts below, how much should Harper Co. report the equipment on its December 31, year 8 balance sheet? For ten periods, the present value of $1 at 5% is 0.61391. The present value of a $1 regular annuity at 5% for ten periods is 7.72173. The current value of a $1 annuity payable in ten periods at 5% is 8.10782 8.10782
8
On January 1, year 8 Harper Co. finances the purchase of equipment by issuing a $15,000 non-interest-bearing note payable. The note will be paid off in 10 equal annual installments beginning on December 31, year 8. The market rate of interest for notes of this type is 5%. Considering the information below, at what amount should Harper Co. report the equipment on its balance sheet dated December 31, year 8? The present value of $1 at 5% for 10 periods 0.61391 The present value of an ordinary annuity of $1 at 5% for 10 periods 7.72173 The present value of an annuity due of $1 at 5% for 10 periods is 8.10782 8.10782
On January 1, year 8 Harper Company finances the purchase of equipment by issuing a $15,000 non-interest-bearing note payable. The note will be paid off in 10 equal annual installments beginning on December 31, year 8. The market rate of interest for notes of this type is 5%. Considering the information below, at what amount should Harper Company report the equipment on its balance sheet dated December 31, year 8? The present value of $1 at 5% for 10 periods 0.61391 The present value of an ordinary annuity of $1 at 5% for 10 periods 7.72173 The present value of an annuity due of $1 at 5% for 10 periods is 8.10782 8.10782 Multiple Choice $9,209 $11,583 $12,162 $15,000

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