Snipes Construction paid for earth-moving equipment by issuing a $330,000, 4-year note that specified 2% interest to be paid on December 31 of each year. The equipments retail cash price was unknown, but it was determined that a reasonable interest rate was 5%.

n = 4

i = 5%

Interest Amount = ?

Interest Present Value = ?

Principal Amount = $330,000

Principal Present Value = ?

Price of Equipment (Present Value) = ?

General Journal Debit Credit

Record the issue of notes payable for equipment purchase.

1) Equipment

2) Discount on notes payable

3) Notes Payable - $330,000 (Credit)