Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

On December 31, 2019, Sheffield Company finished consulting services and accepted in exchange a promissory note with a face value of $820,000, a due date

On December 31, 2019, Sheffield Company finished consulting services and accepted in exchange a promissory note with a face value of $820,000, a due date of December 31, 2022, and a stated rate of 6%, with interest receivable at the end of each year. The fair value of the services is not readily determinable, and the note is not readily marketable. Under the circumstances, the note is considered to have an appropriate imputed rate of interest of 12%.

The following interest factors are provided:

Interest Rate

Table Factors for Three Periods 6% 12%

Future Value of 1 1.19102 1.40493

Present Value of 1 .83962 .71178

Future Value of Ordinary Annuity of 1 3.18360 3.37440

Present Value of Ordinary Annuity of 1 2.67301 2.40183

1. Compute the present value of the note.

2. Prepare the journal entry required on Sheffield 's books at December 31, 2020 in the following format:

Dr. xxxxx $$$

Cr. xxxxx $$$

3. Prepare the journal entry required on Sheffield 's books at December 31, 2021 in the following format:

Dr. xxxxx $$$

Cr. xxxxx $$$

4. Compute the carrying value of the note at December 31, 2021.

Please Show Work

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Students also viewed these Accounting questions

Question

Draw a schematic diagram of I.C. engines and name the parts.

Answered: 1 week ago