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On January 1, 2020, TPM Inc. acquires a piece of equipment for a list price of $300,000. It pays $20,000 immediately and writes a note
On January 1, 2020, TPM Inc. acquires a piece of equipment for a list price of $300,000. It pays
$20,000 immediately and writes a note for the remainder. Annual interest of 3% is due every December 31st, and the principal of the note is payable in 6 years.
TPMs incremental borrowing rate is 6%, while the sellers incremental borrowing rate is 7%. TPM is a public company. It depreciates its equipment using the diminishing balance method at 15%. The equipments residual value is $40,000 at the end of its useful life.
Required
- Prepare all required journal entries for the years 2020 and 2021.
- Determine the Assets net book value on January 1, 2024.
- Determine the note payable carrying value on January 1, 2024.
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