On January 1, 2021, Byner Company purchased a used tractor. Byner paid $6,000 down and signed a noninterest-bearing note requiring $38,000 to be paid on December 31, 2023. 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 fiscal year-end is December 31. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) (Use appropriate factor(s) from the tables provided.)
On January 1, 2021, Byner Company purchased a used tractor. Byner paid $6,000 down and signed a noninterest-bearing note requiring $38,000 to be paid on December 31, 2023. 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 fiscal year-end is December 31. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) (Use appropriate factor(s) from the tables provided.)
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Question
1. why the discount payable note is $9450? I thought discount payable note value is between notes payable and present value, but in this case, it adds cash 6000 which already paid
2. I don't know how to calculate liability amount in this case, could you show me the steps with an explanation?
Transcribed Image Text:On January 1, 2021, Byner Company purchased a used tractor. Byner paid $6,000 down and signed a noninterest-bearing note
requiring $38,000 to be paid on December 31, 2023. 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 fiscal year-end is December 31. (FV of $1, PV of $1,
FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) (Use appropriate factor(s) from the tables provided.)
Required:
1. Prepare the journal entry to record the acquisition of the tractor.
2. How much interest expense will the company include in its 2021 and 2022 income statements for this note?
3. What is the amount of the liability the company will report in its 2021 and 2022 balance sheets for this note?
X Answer is complete but not entirely correct.
Complete this question by entering your answers in the tabs below.
Req 1
Req 2 and 3
Prepare the journal entry to record the acquisition of the tractor. (If no entry is required for a transaction/event, select "No
journal entry required" in the first account field. Do not round intermediate calculations. Round your answers to the nearest
whole dollars.)
No
Transaction
General Journal
Debit
Credit
1
1
Tractor
34,550
Discount on notes payable
9,450
Cash
6,000
Notes payable
38,000
Transcribed Image Text:On January 1, 2021, Byner Company purchased a used tractor. Byner paid $6,000 down and signed a noninterest-bearing note
requiring $38,000 to be paid on December 31, 2023. 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 fiscal year-end is December 31. (FV of $1, PV of $1,
FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) (Use appropriate factor(s) from the tables provided.)
Required:
1. Prepare the journal entry to record the acquisition of the tractor.
2. How much interest expense will the company include in its 2021 and 2022 income statements for this note?
3. What is the amount of the liability the company will report in its 2021 and 2022 balance sheets for this note?
X Answer is complete but not entirely correct.
Complete this question by entering your answers in the tabs below.
Req 1
Reg 2 and 3
Determine how much interest expense the company will include in the income statements and the amount of the liability the
company will report in the balance sheets for this note for 2021 and 2022. (Do not round intermediate calculations. Round
your answers to the nearest whole dollars.)
2021
2022
Interest expense
$
2,855 V $
3,141
Liability amount
2$
2,855 X $
3,141 X
< Req 1
Req 2 and 3 >
Expert Solution
Step 1
The discount of note payable is the difference in the value of the tractor and consideration paid.
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