On January 1, 2018, the Montgomery Company agreed to purchase a building by making six payments. The firstthree are to be $25,000 each, and will be paid on December 31, 2018, 2019, and 2020. The last three are to be$40,000 each and will be paid on December 31, 2021, 2022, and 2023. Montgomery borrowed other money at a10% annual rate.Required:1. At what amount should Montgomery record the note payable and corresponding cost of the building onJanuary 1, 2018?2. How much interest expense on this note will Montgomery recognize in 2018?
On January 1, 2018, the Montgomery Company agreed to purchase a building by making six payments. The firstthree are to be $25,000 each, and will be paid on December 31, 2018, 2019, and 2020. The last three are to be$40,000 each and will be paid on December 31, 2021, 2022, and 2023. Montgomery borrowed other money at a10% annual rate.Required:1. At what amount should Montgomery record the note payable and corresponding cost of the building onJanuary 1, 2018?2. How much interest expense on this note will Montgomery recognize in 2018?
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 14RE: On January 1, 2019, Boater Company issues a 20,000 non-interest-bearing, 5-year note for equipment....
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On January 1, 2018, the Montgomery Company agreed to purchase a building by making six payments. The first
three are to be $25,000 each, and will be paid on December 31, 2018, 2019, and 2020. The last three are to be
$40,000 each and will be paid on December 31, 2021, 2022, and 2023. Montgomery borrowed other money at a
10% annual rate.
Required:
1. At what amount should Montgomery record the note payable and corresponding cost of the building on
January 1, 2018?
2. How much interest expense on this note will Montgomery recognize in 2018?
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