At the beginning of 2021, VHE Industries acquired a machine with a fair value of $3,169,870 by issuing a four-year, noninterest-bearing note in the face amount of $4 million. The note is payable in four annual installments of $1 million at the end of each year. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) (Use appropriate factor(s) from the tables provided.) Required: 1. What is the effective rate of interest implicit in the agreement? 2. to 4. Prepare the necessary journal entries. 5. Suppose the market value of the machine was unknown at the time of purchase, but the market rate of interest for notes of similar risk was 9%. Prepare the journal entry to record the purchase of the machine. Complete this question by entering your answers in the tabs below.
At the beginning of 2021, VHE Industries acquired a machine with a fair value of $3,169,870 by issuing a four-year, noninterest-bearing note in the face amount of $4 million. The note is payable in four annual installments of $1 million at the end of each year. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) (Use appropriate factor(s) from the tables provided.) Required: 1. What is the effective rate of interest implicit in the agreement? 2. to 4. Prepare the necessary journal entries. 5. Suppose the market value of the machine was unknown at the time of purchase, but the market rate of interest for notes of similar risk was 9%. Prepare the journal entry to record the purchase of the machine. Complete this question by entering your answers in the tabs below.
Intermediate Accounting: Reporting And Analysis
3rd Edition
ISBN:9781337788281
Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Chapter14: Financing Liabilities: Bonds And Long-term Notes Payable
Section: Chapter Questions
Problem 11P
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