At January 1, 2018, Brant Cargo acquired equipment by issuing a four-year, $175,

Question

At January 1, 2018, Brant Cargo acquired equipment by issuing a four-year, $175,000 (payable at maturity), 6% note. The market rate of interest for notes of similar risk is 12%. (FV of$1, PV of$1. EVA of $1, PVA of$1. EVAD of $1 and PVAD of $1) (Use appropriate factor(s) from the tables provided.) Required: 1. to 3. Prepare the necessary journal entries for Brant Cargo. (lf no entry is required for a transaction/event, select "No journal entry required" in the first account field. Round your final answers to nearest whole dollar) No Date General Journal Debit Credit January 01 2018 Equipment Discount on notes payable Notes payable December 31,Interest expense 2 2018 Discount on notes payable Cash mber 31, Interest expense 2019 Discount on notes payable Cash

Explanation / Answer

Journal Entry No. Date General Journal Debit Credit 1 Jan1,2018 Equipment $143,108 Discount on Note Payable $31,892 Note Payable $175,000 2 Dec 31,2018 Interest Expense $17,173 Discount on Notes Payable $6,673 Cash $10,500 3 Dec 31,2018 Interest Expense $17,974 Discount on Notes Payable $7,474 Cash $10,500 W/N:-1: Compute PV of note payable as follows Interest PVF @12% Present Value 10500                           0.893                       9,375 10500                           0.797                       8,371 10500                           0.712                       7,474 10500                           0.636                       6,673                    31,892 W/N:-2: Computation of W/off of Discount on note payable as follows Year Interest 12% on Carrying Amount Interest 6 % on Note Payable Effect on Carrying Value Carrying Amount 0                   143,108 1                         17,173                    10,500                        6,673                   149,781 2                         17,974                    10,500                        7,474                   157,255 3                         18,871                    10,500                        8,371                   165,625 4                         19,875                    10,500                        9,375                   175,000

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