On December 31, 2022, the Clearwater Corporation acquired a custom-made plant asset by issuing a promissory note

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On December 31, 2022, the Clearwater Corporation acquired a custom-made plant asset by issuing a promissory note with a face value of $750,000, a due date of December 31, 2027, and a stated (coupon) rate of interest of 2%. Interest is compounded annually and is payable at the end on each year. The fair value of the customized asset is not readily determinable and the note receivable is not publicly traded. Given the company’s incremental borrowing rate and current market conditions, the imputed rate of interest for the note is estimated as 6%. Determine the present value of the note and prepare the journal entry to record the transaction for Clearwater Corporation.

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Intermediate Accounting

ISBN: 9780136946694

3rd Edition

Authors: Elizabeth A. Gordon, Jana S. Raedy, Alexander J. Sannella

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