On January 1, 2021, Nima Inc., a publicly traded company that follows IFRS, purchased a piece of equipment for a price of $400,000. Nima paid $50,000 immediately and wrote a note for the remainder. Annual interest of 4% is due every December 31*, and the principal of the note is payable in 4 years. Nima's incremental borrowing rate is 5%, while the seller's incremental borrowing rate is 6%. Nima depreciates its equipment using the straight-line method. The equipment's residual value is $40,000 and the useful life is 7 years. Required 1) Prepare all required journal entries for the 2021. 2) Determine the Asset's net book value on December 31, 2023. 3) Determine the note payable carrying value on December 31, 2023.
On January 1, 2021, Nima Inc., a publicly traded company that follows IFRS, purchased a piece of equipment for a price of $400,000. Nima paid $50,000 immediately and wrote a note for the remainder. Annual interest of 4% is due every December 31*, and the principal of the note is payable in 4 years. Nima's incremental borrowing rate is 5%, while the seller's incremental borrowing rate is 6%. Nima depreciates its equipment using the straight-line method. The equipment's residual value is $40,000 and the useful life is 7 years. Required 1) Prepare all required journal entries for the 2021. 2) Determine the Asset's net book value on December 31, 2023. 3) Determine the note payable carrying value on December 31, 2023.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
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Transcribed Image Text:On January 1, 2021, Nima Inc., a publicly traded company that follows IFRS, purchased a piece
of equipment for a price of $400,000. Nima paid $50,000 immediately and wrote a note for the
remainder. Annual interest of 4% is due every December 31*, and the principal of the note is
payable in 4 years.
Nima's incremental borrowing rate is 5%, while the seller's incremental borrowing rate is 6%.
Nima depreciates its equipment using the straight-line method. The equipment's residual value is
$40,000 and the useful life is 7 years.
Required
1) Prepare all required journal entries for the 2021.
2) Determine the Asset's net book value on December 31, 2023.
3) Determine the note payable carrying value on December 31, 2023.
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