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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Question

Transcribed Image Text:A one year note payable is issued by a bank to ABC company to purchase a photocopy
machine valued at $7,000. The amount owing to the bank for the note must be paid back
in one year. Hence, this is a short-term note payable. The interest rate charged by the
bank is 12%. Interest charged on the note is included in the payment of $10,000 to be
paid to the bank at the end of the year.
Required:
(a) Calculate the present value of the note (PV).
(a)
(b) Record the journal entry:
i. on the day the asset is purchased
General Journal
POST
DATE ACCOUNT TITLE AND EXPLANATION REF DEBIT CREDIT
ii. on the day the note payable is paid back to the bank.
General Journal
POST
DATE ACCOUNT TITLE AND EXPLANATION REF. DEBIT CREDIT
AND E
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