Southtown Corporation purchased equipment and in exchange signed a two-year promissory note.The note requires Southtown to make a single payment of $100,000 in two years. Southtown hasother promissory notes that charge interest at the annual rate of 6 percent.Required:1. Compute the present value of the note, rounded to the nearest dollar, using Southtown’s typical interest rate of 6 percent.2. Show the journal entry to record the equipment purchase (round to the nearest dollar).3. Show the adjusting journal entry at the end of the first year to record interest on the note.
Southtown Corporation purchased equipment and in exchange signed a two-year promissory note.The note requires Southtown to make a single payment of $100,000 in two years. Southtown hasother promissory notes that charge interest at the annual rate of 6 percent.Required:1. Compute the present value of the note, rounded to the nearest dollar, using Southtown’s typical interest rate of 6 percent.2. Show the journal entry to record the equipment purchase (round to the nearest dollar).3. Show the adjusting journal entry at the end of the first year to record interest on the note.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Southtown Corporation purchased equipment and in exchange signed a two-year promissory note.
The note requires Southtown to make a single payment of $100,000 in two years. Southtown has
other promissory notes that charge interest at the annual rate of 6 percent.
Required:
1. Compute the present value of the note, rounded to the nearest dollar, using Southtown’s typical interest rate of 6 percent.
2. Show the
3. Show the
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