Problem 4: Other Topics

4.1: On January 1, 2000, Stay Indoors Corp purchased a computer server from Remote Working Warehouse (RWW). They paid for the server by issuing RWW a $150,000 note payable which matures on December 31, 2019 (20-year term). The note pays interest at 6% and the market rate for bonds of equivalent risk is 20%. The present value of this note is $62,537. ABC also paid $19,000 (cash) to a third party for the installation of the server. Record the January 1, 2000 journal entry for ABC Corp.

4.2: On July 1, 2000, Stay Indoors and RWW agreed to settle the note payable early. Stay Indoors paid RWW $I10,000 cash and gave RWW piece equipment in exchange for full settlement of the note. The equipment was on Stay Indoors books for $519,000 with accumulated depreciation of $479,000. RWW gave Stay Indoors $50,000 in fair value for the equipment. Record Stay Indoors journal entry for the settlement of the note payable. The unamortized discount on the note payable on July 1, 2000, was $85,709.