Stellar Corporation purchased equipment and in exchange signed a two-year promissory note. Thenote requires Stellar to make a single payment of $100,000 in two years. Stellar has other promissory notes that charge interest at the annual rate of 5 percent.Required:1. Compute the present value of the note, rounded to the nearest dollar, using Stellar’s typicalinterest rate of 5 percent.2. Show the journal entry to record the equipment purchase (round to the nearest dollar).

Question

Stellar Corporation purchased equipment and in exchange signed a two-year promissory note. The
note requires Stellar to make a single payment of $100,000 in two years. Stellar has other promissory notes that charge interest at the annual rate of 5 percent.
Required:
1. Compute the present value of the note, rounded to the nearest dollar, using Stellar’s typical
interest rate of 5 percent.
2. Show the journal entry to record the equipment purchase (round to the nearest dollar).

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