Buon Appetito Limited has been experiencing increased customer demand for its specialty food products. In order to

Question:

Buon Appetito Limited has been experiencing increased customer demand for its specialty food products. In order to meet this demand, the company has bought additional refrigeration units to hold more inventory. To finance this purchase, Buon Appetito issued a four-year non-interest-bearing note, with a of $400,000. The prevailing interest rate for similar instruments is 10%. The company agreed to repay the note in four equal instalments. Buon Appetito used the effective interest method to amortize any premium or discount.
Instructions
(Round to the nearest dollar in all calculations.)
(a) Using time value of money tables, a financial calculator, and computer spreadsheet functions, prepare the journal entry(ies) at the date of purchase.
(b) Prepare the journal entry(ies) at the end of the first year to record the payment and interest.
(c) Prepare the journal entry(ies) at the end of the second year to record the payment and interest.
Face Value
Face value is a financial term used to describe the nominal or dollar value of a security, as stated by its issuer. For stocks, the face value is the original cost of the stock, as listed on the certificate. For bonds, it is the amount paid to the...