Question
Waterway Limited has been experiencing increased customer demand for its specialty food products. To meet this demand, the company has bought additional refrigeration units to
Waterway Limited has been experiencing increased customer demand for its specialty food products. To meet this demand, the company has bought additional refrigeration units to hold more inventory. To finance this purchase, Waterway issued a four-year noninterest-bearing note, with a face value of $840,000. The prevailing interest rate for similar instruments is 11%. The company agreed to repay the note in four equal instalments. Waterway used the effective interest method to amortize any premium or discount.
a. Using (1) factor tables, (2) a financial calculator, or (3) Excel function PV, prepare the journal entry at the date of purchase.
b. Prepare the journal entry at the end of the first year to record the payment and interest.
c.Prepare the journal entry at the end of the second year to record the payment and interest.
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