Question
On January 1, 2013, Belgium Chocolates lent $75,000 to its CEO, interest-free. Use salaries expense for any expense related to the transaction. The loan is
On January 1, 2013, Belgium Chocolates lent $75,000 to its CEO, interest-free. Use salaries expense for any expense related to the transaction. The loan is repayable in full in four years. The market rate for similar loans (with similar credit risk) is 5%.
Instructions
a) Calculate the present value (fair value) of this loan (round to the nearest dollar). Why is it not the same as the actual cash advanced?
b) Prepare the journal entry to record this transaction
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access with AI-Powered Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started
Income Tax Fundamentals 2013
Authors: Gerald E. Whittenburg, Martha Altus Buller, Steven L Gill
31st Edition
1111972516, 978-1285586618, 1285586611, 978-1285613109, 978-1111972516
