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Preparing Entries and Interest Schedule for Long-Term Note Receivable; Effective Interest Method On January 1 of Year 1, Stealth Company sold a machine (classified as inventory) that had a list price of $82,800. The customer paid $13,800 cash and signed a three-year, $69,000 note that specified a stated rate of 3%. Annual interest on the full amount of the principal is payable each December 31. The principal is payable on December 31, three years later. The market rate for a note of this risk is 10%. Required a. Compute the present value of this note. b. Prepare an effective interest schedule for this note. c. Prepare entries required by Stealth for this note on January 1 of Year 1, and December 31 of Year 1, Year 2, and Year 3. • Note: Round answers to the nearest whole dollar. a. Present value of note: $ 56,988 x

Preparing Entries and Interest Schedule for Long-Term Note Receivable; Effective Interest Method On January 1 of Year 1, Stealth Company sold a machine (classified as inventory) that had a list price of $82,800. The customer paid $13,800 cash and signed a three-year, $69,000 note that specified a stated rate of 3%. Annual interest on the full amount of the principal is payable each December 31. The principal is payable on December 31, three years later. The market rate for a note of this risk is 10%. Required a. Compute the present value of this note. b. Prepare an effective interest schedule for this note. c. Prepare entries required by Stealth for this note on January 1 of Year 1, and December 31 of Year 1, Year 2, and Year 3. • Note: Round answers to the nearest whole dollar. a. Present value of note: $ 56,988 x

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Preparing Entries and Interest Schedule for Long-Term Note Receivable; Effective Interest Method On January 1 of Year 1, Stealth Company sold a machine (classified as inventory) that had a list price of $82,800. The customer paid $13,800 cash and signed a three-year, $69,000 note that specified a stated rate of 3%. Annual interest on the full amount of the principal is payable each December 31. The principal is payable on December 31, three years later. The market rate for a note of this risk is 10%. Required a. Compute the present value of this note. b. Prepare an effective interest schedule for this note. c. Prepare entries required by Stealth for this note on January 1 of Year 1, and December 31 of Year 1, Year 2, and Year 3. • Note: Round answers to the nearest whole dollar. a. Present value of note: $ 56,988 X
Transcribed Image Text:Preparing Entries and Interest Schedule for Long-Term Note Receivable; Effective Interest Method On January 1 of Year 1, Stealth Company sold a machine (classified as inventory) that had a list price of $82,800. The customer paid $13,800 cash and signed a three-year, $69,000 note that specified a stated rate of 3%. Annual interest on the full amount of the principal is payable each December 31. The principal is payable on December 31, three years later. The market rate for a note of this risk is 10%. Required a. Compute the present value of this note. b. Prepare an effective interest schedule for this note. c. Prepare entries required by Stealth for this note on January 1 of Year 1, and December 31 of Year 1, Year 2, and Year 3. • Note: Round answers to the nearest whole dollar. a. Present value of note: $ 56,988 X
C. Date Jan. 1, Year 1 Dec. 31, Year 1 Dec. 31, Year 2 Dec. 31, Year 3 Dec. 31, Year 3 Account Name Cash Note Receivable Sales Discount Sales Revenue To record sale of equipment. To record interest on note. To record interest on note. To record interest on note. To record settlement of note. .. .. M ✓ .. ✓ Dr. 13,800 69,000 0 0 0 0 0 0 V 0 0 0 0 Cr. 0 0✓ 25,812 x 56,988 x 0x 0x 0x 0x 0x 0x 0x 0x 0 0x 0x 0x ↑
Transcribed Image Text:C. Date Jan. 1, Year 1 Dec. 31, Year 1 Dec. 31, Year 2 Dec. 31, Year 3 Dec. 31, Year 3 Account Name Cash Note Receivable Sales Discount Sales Revenue To record sale of equipment. To record interest on note. To record interest on note. To record interest on note. To record settlement of note. .. .. M ✓ .. ✓ Dr. 13,800 69,000 0 0 0 0 0 0 V 0 0 0 0 Cr. 0 0✓ 25,812 x 56,988 x 0x 0x 0x 0x 0x 0x 0x 0x 0 0x 0x 0x ↑
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