Straight Industries purchased a large piece of equipment from Curvy Company on January 1, 2019. Straight Industries signed a note, agreeing to pay Curvy Company $370,000 for the equipment on December 31, 2019. The market rate of interest for similar notes was 10%. The present value of $370.000 discounted at 10% for four years was $252,715. On January 1, 2019, Straight Industries recorded the purchase with a debit to equipment for $252,715 and a credit to notes payable for $252,715. On Straight Industries' balance sheet for the year ended December 31, 2019, the book value of the liability for notes payable, including accrued interest would be closest to: Multiple Cholce $277,987. $289.715. $285,208. $287.408.

Straight Industries purchased a large piece of equipment from Curvy Company on January 1, 2019. Straight Industries signed a note, agreeing to pay Curvy Company $370,000 for the equipment on December 31, 2019. The market rate of interest for similar notes was 10%. The present value of $370.000 discounted at 10% for four years was $252,715. On January 1, 2019, Straight Industries recorded the purchase with a debit to equipment for $252,715 and a credit to notes payable for $252,715. On Straight Industries' balance sheet for the year ended December 31, 2019, the book value of the liability for notes payable, including accrued interest would be closest to: Multiple Cholce $277,987. $289.715. $285,208. $287.408.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

See similar textbooks

Similar questions

On January 1, 2020, Coleman Auto sold a Tracktor to Southern Energy in exchange for a 5-year zero-interest-bearing note with a face amount of $135,000, due January 1, 2025. Coleman’s credit rating makes it eligible to borrow money at 3% interest. Southern Energy’s credit rating makes it eligible to borrow money at 5% interest compounded annually from local banks. Coleman’s inventory records show the truck’s original cost at $80,000. Instructions: Record all business transactions for 2020 related to the Sale and Coleman’s accounting records, assuming Colemans has a December 31, 2020 year-end.
Domestic
(e) On December 31, 2015, Malton Company acquired a computer from Hamilton Corporation by issuing a $600,000 zero-interest-bearing note, payable in full on December 31, 2019. Malton Company’s credit rating permits it to borrow funds from its several lines of credit at 10%. The computer is expected to have a 5-year life and a $70,000 residual value. Prepare the journal entry for the purchase on December 31, 2015 and any necessary adjusting entries relative to depreciation (use straight-line) and amortization on December 31, 2016.
On January 1, 2020, Caribou Explorations Limited (CEL) sold inventory costing $32,000 and, in exchange, received $6,000 cash and a $40,000 promissory note. The five-year note was repayable in equal annual instalments of $8,734 including interest at 7%. The market rate of interest for similar transactions was 7%. The first payment was due January 1, 2021. CEL has a December 31 year-end and follows IFRS. CEL uses the net method. CEL also extends generous payment terms to its many customers. As a result, the company has accumulated a substantial portfolio of accounts receivables. To improve cash flow, the company decided to sell some of its receivables to a factor. On June 30 2020, CEL factored $300,000 of its account receivables. CEL had previously checked the creditworthiness of its customers and is, therefore, confident that only a few accounts will be uncollectible. Therefore, the company chose to factor these receivables with recourse. In exchange for these receivables, the factor…
On January 1, 2021, Beauty Company sold a machine with a cost of P500,000 and accumulated depreciation of P350,000 to Gee Company. In lieu of cash payment, Gee Company gave Beauty Company a 4-year, P100,000, 10% note. The note requires interest to be paid annually on December 31. The 10% interest rate is a realistic rate of interest for a note of this type. Required: Compute the following as of December 31, 2021: (Round off PV factors to 4 decimal places before multiplying.) 1. Effective interest rate 2. Gain or loss on sale of machinery (place parenthesis if loss) 3. Interest income
Marin Cosmetics Co. purchased machinery on December 31, 2019, paying $47,300 down and agreeing to pay the balance in four equal installments of $46,400 payable each December 31. An assumed interest of 8% is implicit in the purchase price. Prepare the journal entries that would be recorded for the purchase and for (1) the payments and (2) interest on the following dates. (Round answers to O decimal places, e.g. 38,548. If no entry is required, select "No Entry" for the account titles and enter O for the amounts. Credit account titles are automatically indented when amount is entered. Do not indent manually.) (a) December 31, 2019. (b) December 31, 2020. (c) December 31, 2021. (d) December 31, 2022. (e) December 31, 2023.
On January 1, 2019, Bestbuy Inc. purchased land that had an assessed value of P6,000,000 at the time of purchase. AP9,000,000 non-interest-bearing note due January 1, 2021 was given in exchange. There was no established exchangeprice for the land, nor a ready market value for the note. The interest rate charged on a note of this type is 12%. The present value of 1 at 12% for 3 periods is 0.7118. The present value of an annuity of 1 at 12 % for 3 periods is 2.4018. In its December 31, 2019 balance sheet, what carrying amount should Bestbuy report as Note payable?a. P7,270,800 c. P8,070,048b. P7,174,944 d. P9,000,000
Lincoln Company purchased merchandise from Grandville Corp, on September 30, 2021. Payment was made in the form of a noninterest-bearing note requiring Lincoln to make six annual payments of $5,200 on each September 30, beginning on September 30, 2024 (EV of $1. PV of $1. EVA of $1. PVA of $1. FVAD of $1 and PVAD of $1) (Use appropriate factor(s) from the tables provided. Round your final answer to nearest whole dollar amount.) Required: Calculate the amount at which Lincoln should record the note payable and corresponding purchases on September 30, 2021, assuming that an interest rate of 11% properly reflects the time value of money in this situation Amount recorded
Concord Corporation purchased a computer on December 31, 2024, for $115,500, paying $33,000 down and agreeing to pay the balance in five equal installments of $16,500 payable each December 31 beginning in 2025. An assumed interest rate of 10% is implicit in the purchase price. Prepare the journal entry at December 31, 2025, to record the payment and interest (effective-interest method employed). (Round answers to 2 decimal places, e.g. 52.75. Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter O for the amounts. List all debit entries before credit entries.) Date Account Titles and Explanation c. 31, 2025 Interest Expense Notes Payable Cash Discount on Notes Payable Debit 6600 16,500 Credit 6600 16500 Prepare the journal entry at December 31, 2026, to record the payment and interest (effective-interest method employed). (Round answers to 2 decimal places, e.g. 52.75.…
President Company purchased merchandise from Captain Corporation on September 30, 2024. Payment was made in the form of a noninterest-bearing note requiring President to make six annual payments of $4,600 on each September 30, beginning on September 30, 2027. Calculate the amount at which President should record the note payable and corresponding purchase on September 30, 2024, assuming that an interest rate of 10% properly reflects the time value of money in this situation. Note: Use tables, Excel, or a financial calculator. Round your final answers to nearest whole dollar amount. Round your intermediate calculations to the nearest whole dollar. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1)
Pisbol Company sold an equipment with a carrying amount of $750,000 on April 1,2020. Pisbol received a promissory note which bears an interest of 12% payable annually with a face value of $1,000,000. The principal is payable after 4 years from April 1,2020. The prevailing market rate of interest is 10%. (For present value factors, do not round off) How much is the interest income for year 2021 and carrying value of the notes as of December 31,2021?
American Food Services, Incorporated, acquired a packaging machine from Barton and Barton Corporation. . Barton and Barton completed construction of the machine on January 1, 2024. In payment for the $4.9 million machine, American Food Services Issued a four-year Installment note to be paid in four equal payments at the end of each year. • The payments Include Interest at the rate of 12%. Required: 1. Prepare the journal entry for American Food Services purchase of the machine on January 1, 2024. 2. Prepare an amortization schedule for the four-year term of the installment note. 3. Prepare the journal entry for the first installment payment on December 31, 2024. 4. Prepare the Journal entry for the third Installment payment on December 31, 2026. Note: Use tables, Excel, or a financial calculator. (FV of $1, PV of $1. FVA of $1. PVA of $1. FVAD of $1 and PVAD of $1) · Complete this question by entering your answers in the tabs below. Req 2 Req 1 3 and 4 Prepare an amortization schedule…