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Required: (a) Calculate the present value of the note (PV).

Required: (a) Calculate the present value of the note (PV).

Essentials Of Investments
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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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
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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