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On January 1, 2024, Byner Company purchased a used tractor. Byner paid $6,000 down and signed a noninterest-bearing note requiring $39,000 to be paid on
On January 1, 2024, Byner Company purchased a used tractor. Byner paid $6,000 down and signed a noninterest-bearing note requiring $39,000 to be paid on December 31, 2026. The fair value of the tractor is not determinable. An interest rate of 11% properly reflects the time value of money for this type of loan agreement. The companys fiscal year-end is December 31.
Note: Use tables, Excel, or a financial calculator. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1)
Required:
- Prepare the journal entry to record the acquisition of the tractor.
- How much interest expense will the company include in its 2024 and 2025 income statements for this note?
- What is the amount of the liability the company will report in its 2024 and 2025 balance sheets for this note?
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