Question
Requirement 1: Interest Rate ________ % Requirement 2: Record the purchase of the machine (Journal Entries) Date General Journal Debit Credit January 1, 21 Record
Requirement 1:
Interest Rate | ________ | % |
Requirement 2:
Record the purchase of the machine (Journal Entries)
Date | General Journal | Debit | Credit |
January 1, 21 |
Record the first Installment at December, 2021 and the second payment at December 31, 22
Date | General Journal | Debit | Credit |
December 31, 21 | |||
December 31, 2022 | General Journal | Debit | Credit |
At the beginning of 2021, VHF Industries acquired a machine with a fair value of $6,774,420 by issuing a four-year, noninterest-bearing note in the face amount of $8 million. The note is payable in four annual installments of $2 million at the end of each year. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) (Use appropriate factor(s) from the tables provided.) Required: 1. What is the effective rate of interest implicit in the agreement? 2. to 4. Prepare the necessary journal entries. 5. Suppose the market value of the machine was unknown at the time of purchase, but the market rate of interest for notes of similar risk was 12%. Prepare the journal entry to record the purchase of the machine.
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