Discounting of Notes Payable On October 30, 2007 the Sanchez Company acquired a piece of machinery and
Question:
Discounting of Notes Payable On October 30, 2007 the Sanchez Company acquired a piece of machinery and signed a 12-month note for $24,000. The face value of the note includes the price of the machinery and interest. The note is to be paid in four $6,000 quarterly installments. The value of the machinery is the present value of the four quarterly payments discounted at an annual interest rate of 16%.
Required
1. Prepare all the journal entries required to record the preceding information including the year-end adjusting entry and the installment payments. Present value techniques should be used.
2. Show how the preceding items would be reported on the December 31, 2007 balance sheet.
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...
Step by Step Answer:
1 2007 Oct 30 Machinery 2177937 Discount on Notes Payable 222063 Notes Payable 2400000 6000 3629895 ...View the full answer
Intermediate Accounting
ISBN: 978-0324300987
10th Edition
Authors: Loren A Nikolai, D. Bazley and Jefferson P. Jones
