LOL Company paid for the acquisition of an equipment by signing a $100,000 three year 6% note on January 1, 2019 in favor of the equipments manufacturer. The interest on the note is paid annually. The market interest rate of the note with similar terms and condition is 10%. In addition, Montana also paid cash of $25,000 upfront.

1. Calculate the present value of the note and make a journal entry for the acquisition of the equipment on January 1, 2019. Show your calculations.

2. Prepare a journal entry for interest payments and interest expenses on December 31, 2019.

Part B:

Carl Manufacturing purchased a purchased a plant asset on July 1, 2020 by issuing a one-year note with a face value of $10,165. The plant asset has a fair value of $9,500 at the time of the purchase.

Determine at what value the asset would be recorded in Carls book and make a journal entry for the asset purchase on July 1, 2020.

Prepare the journal entries in Carl's book for interest expenses on December 31, 2020 and June 30, 2021 and notes repayment on June 30, 2021. Carls fiscal year ends on December 31.