Question
The Montana Company paid for the acquisition of an equipment by signing a $100,000 three year 6% note on January 1, 2019 in favor of
The Montana Company paid for the acquisition of an equipment by signing a $100,000 three year 6% note on January 1, 2019 in favor of the equipments manufacturer. The interest on the note is paid annually. The market interest rate of the note with similar terms and condition is 10%. In addition, Montana also paid cash of $25,000 upfront.
Calculate the present value of the note, make a journal entry for the acquisition of the equipment on January 1, 2019, and make a journal entry for interest payments/expenses on December 31, 2019. Show your calculations.
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