Braxton Technologies, Inc. constructed a conveyor for A&G Warehousers that was completed and ready for use on January 1, 2016. A&G paid for the conveyor by issuing a $100,000, four-year bond that specified 5% interest to be paid on December 31 of each year, and the bond 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 10%. Required: 1. Prepare the journal entry for A&G's purchase of the conveyor on January 1, 2016. 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, 2018

Braxton Technologies, Inc. constructed a conveyor for A&G Warehousers that was completed and ready for use on January 1, 2016. A&G paid for the conveyor by issuing a $100,000, four-year bond that specified 5% interest to be paid on December 31 of each year, and the bond 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 10%. Required: 1. Prepare the journal entry for A&G's purchase of the conveyor on January 1, 2016. 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, 2018

Principles of Accounting Volume 1

19th Edition

ISBN:9781947172685

Author:OpenStax

Publisher:OpenStax

Chapter13: Long-term Liabilities

Section: Chapter Questions

Problem 1PA: On January 1, 2018, King Inc. borrowed $150,000 and signed a 5-year, note payable with a 10%...

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On January 1, 2018, King Inc. borrowed $150,000 and signed a 5-year, note payable with a 10% interest rate. Each annual payment is in the amount of $39,569 and payment is due each Dec. 31. What is the journal entry on Jan. 1 to record the cash received and on Dec. 31 to record the annual payment? (You will need to prepare the first row in the amortization table to determine the amounts.)
Braxton Technologies, Inc., constructed a conveyor for A&G Warehousers that was completed and ready for use on January 1, 2016. A&G paid for the conveyor by issuing a $100,000, four-year note that specified 5% 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 10%. Required: 1. Prepare the journal entry for A&G’s purchase of the conveyor on January 1, 2016. 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, 2018. 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, 2016, what would be the amount of each installment? 5. Prepare an amortization schedule for the four-year term of…
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