On May 31, 2022, Ace Tractor Company sold a tractor to Joker Excavating in exchange for a 2-year,$500,000, non-interest-bearing note. Joker Excavating will make a $300,000 payment on May 31,2023 and pay a lump-sum payment of 200,000 on May 31, 2024. Year end is December 31.Assume that your year-end adjusting entries are reversed. Do not show the reversal entry. If you donot know what a reversing journal entry is, it is important that you find out before completing thisquestion. Joker Excavating would normally pay an interest rate of 8%.RequiredPrepare all journal entries required for the note for the seller, Ace Tractor, from the initial sale torepayment. Count exact days for the year-end interest revenue adjustment. Calculate and journalizefinal amounts to the nearest dollar. Note that using the cash flow keys on your financial calculator isthe easiest way to calculate the present value of this note. (20 marks)

2022 Interest computation: $500,000.00 * 8% * 7/12(months) = $23,333.332023 Interest computation:…

Answered: On May 31, 2022, Ace Tractor Company…

Intermediate Accounting: Reporting And Analysis

3rd Edition

ISBN:9781337788281

Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Chapter13: Investments And Long-term Receivables

Section: Chapter Questions

Problem 10MC: On January 1, 2019, Park Company accepted a 36,000, non-interest-bearing, 3-year note from a major...

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On May 31, 2022, Ace Tractor Company sold a tractor to Joker Excavating in exchange for a 2-year,
$500,000, non-interest-bearing note. Joker Excavating will make a $300,000 payment on May 31,
2023 and pay a lump-sum payment of 200,000 on May 31, 2024. Year end is December 31.
Assume that your year-end adjusting entries are reversed. Do not show the reversal entry. If you do
not know what a reversing journal entry is, it is important that you find out before completing this
question. Joker Excavating would normally pay an interest rate of 8%.
Required
Prepare all journal entries required for the note for the seller, Ace Tractor, from the initial sale to
repayment. Count exact days for the year-end interest revenue adjustment. Calculate and journalize
final amounts to the nearest dollar. Note that using the cash flow keys on your financial calculator is
the easiest way to calculate the present value of this note. (20 marks)

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On January 1, 2019, Park Company accepted a 36,000, non-interest-bearing, 3-year note from a major customer in exchange for used equipment. The equipment had originally cost Park 200,000 and had a book value of 20,000 on the date of the sale. At the 12% imputed interest rate for this type of loan, the present value of the note is 25,500 on January 1, 2019. Park uses the effective interest rate. What is the carrying value of the note receivable on Parks December 31, 2019, balance sheet? a. 28,560 b. 29,000 c. 32,500 d. 36,000
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On January 1, 2024, Byner Company purchased a used tractor. Byner paid $2,000 down and signed a noninterest-bearing note requiring $29,000 to be paid on December 31, 2026. 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. Note: Use tables, Excel, or a financial calculator. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) Required: Prepare the journal entry to record the acquisition of the tractor. How much interest expense will the company include in its 2024 and 2025 income statements for this note? What is the amount of the liability the company will report in its 2024 and 2025 balance sheets for this note?
On January 1, 2020, Happy Inc. sold a hot tub to Monica, receiving a two-year, noninterest-bearing note of $9,680 in exchange for a hot tub that normally sells for $8,000. The note is for an amount that achieves an effective interest rate of 10% per year. Required: Prepare the journal entry to record the sale Prepare any adjusting entry necessary on December 31, 2020. Prepare any adjusting entry necessary on December 31, 2021 (maturity).
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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. Record journal entries for December 31, 2020, Prepare any necessary adjusting entries related to depreciation of the asset (use straight-line) and amortization of the note (use the effective interest method) on December 31, 2021.
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