ework Seved Braxton Technologies, Inc., constructed a conveyor for A&G; Warehous
ID: 2514931 • Letter: E
Question
ework Seved Braxton Technologies, Inc., constructed a conveyor for A&G; Warehousers that was completed and ready for use on January 1, 2018 A&G; paid for the conveyor by issuing a $100,000, four-year note that specified 4% interest to be paid on December 31 of each year, and the note is to be repaid at the end of four years. The conveyor was custom-built for A&G;, so its cash price was unknown. By comparison with similar transactions it was determined that a reasonable interest rate was 12% (E f P of L E Ao L 0 $1. FVAD of $1 and PVAD of S1) (Use appropriate factor(s) from the tables provided.) Required: 1. Prepare the journal entry for A&G;'s purchase of the conveyor on Januery 1, 2018. 2. Prepare an amortization schedule for the four-year term of the note. 3. Prepare the journal entry for A&G;'s third interest payment on December 31, 2020 4. If A&G;'s note had been an installment note to be paid in four equal payments at the end of each year beginning December 31, 2018, what would be the amount of each installment? 5. By considering the installment payment of required 4 Prepare an amortization schedule for the four year term of the installment note 6. Prepare the journal entry for A&G;'s third installment payment on December 31, 2020 Complete this question by entering your answers in the tabs below Required 1 Required 2 Required 3 Required 4 Required 5 Required 6 Prepare the journal entry for A&G;'s third installment payment on December 31, 2020. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Enter your answers in whole dollars.) K Prey 9 o 17 NextExplanation / Answer
Face value of the note = $100,000
Interest rate declared = 4%
Annual interest payment = $4000
Market interest rate =12%
PV factor for an annuity of $1 at 12% for four years = 3.0373
PV factor for $1 received after four years = 0.6355
(A) PV of annual interest payment = $4,000 x 3.0373 = 12,149
(B) PV of face value of the note = $100,000 x 0.6355 = $63,550
Market value of the note A+B = $75,699 Say $75,700
4. Each instalment will be $27,570.
The calculation is shown below.
5. Amortization shcedule s given below
6.
1. Entry to record purchase of the conveyor Date Acount Title Debit Credit Jan.1, 2018 Equipment 75700 Discount on note payable 24300 Note payable 100000 2. Amortization schedule is given below.Related Questions
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