Stellar Corporation purchased equipment and in exchange signed a two-year promissory note. Thenote requires Stellar to make a single payment of $100,000 in two years. Stellar has other promissory notes that charge interest at the annual rate of 5 percent.Required:1. Compute the present value of the note, rounded to the nearest dollar, using Stellar’s typicalinterest rate of 5 percent.2. Show the journal entry to record the equipment purchase (round to the nearest dollar).

Stellar Corporation purchased equipment and in exchange signed a two-year promissory note. Thenote requires Stellar to make a single payment of $100,000 in two years. Stellar has other promissory notes that charge interest at the annual rate of 5 percent.Required:1. Compute the present value of the note, rounded to the nearest dollar, using Stellar’s typicalinterest rate of 5 percent.2. Show the journal entry to record the equipment purchase (round to the nearest dollar).

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter19: Lease And Intermediate-term Financing

Section: Chapter Questions

Problem 19P

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Concept explainers

Consolidation

Consolidation in general examination implies an asset oscillating between well-defined methods of trading status. Consolidation is commonly known as market indecisiveness, which completes when the asset's values move forward or backward the trading structure.

Question

Stellar Corporation purchased equipment and in exchange signed a two-year promissory note. The
note requires Stellar to make a single payment of $100,000 in two years. Stellar has other promissory notes that charge interest at the annual rate of 5 percent.
Required:
1. Compute the present value of the note, rounded to the nearest dollar, using Stellar’s typical
interest rate of 5 percent.
2. Show the journal entry to record the equipment purchase (round to the nearest dollar).

Definition Definition Method of recording financial transactions in the book of original entry by debiting and crediting the accounts affected by a transaction using the golden rules of accrual accounting.

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