Question
Problem B At the beginning of 2018, Pineapple Inc. acquired a machine by issuing a $14,400 3-year non interest-bearing note. The machinery had a book
Problem B
At the beginning of 2018, Pineapple Inc. acquired a machine by issuing a $14,400 3-year non interest-bearing note. The machinery had a book value of $4,350 in the seller's book. Although Pineapple felt that it could get a similar machine for less than $14,400, it was satisfied, since it would normally have to borrow at 10%. The principal of the note is to be repaid at $4,800 per year, beginning on 12/31/2018.
Required:
Prepare all the journal entries in books of Pineapple Inc. relating to this note in the year 2018. Specifically, what do you use as the interest rate in calculating present value of the machinery?
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