The Montana Company paid for the acquisition of an equipment by signing a $100,000 three year 6% note on January 1, 2019 in favor of the equipment's manufacturer. The interest on the note is paid annually. The market interest rate of the note with similar terms and condition is 10%. In addition, Montana also paid cash of $25,000 upfront. Calculate the present value of the note and make a journal entry for the acquisition of the equipment on January 1, 2019. Show your calculations.

The Montana Company paid for the acquisition of an equipment by signing a $100,000 three year 6% note on January 1, 2019 in favor of the equipment's manufacturer. The interest on the note is paid annually. The market interest rate of the note with similar terms and condition is 10%. In addition, Montana also paid cash of $25,000 upfront. Calculate the present value of the note and make a journal entry for the acquisition of the equipment on January 1, 2019. Show your calculations.

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

Chapter9: Current Liabilities And Contingent Obligations

Section: Chapter Questions

Problem 4E: Discounting of Notes Payable On October 30, 2019, Sanchez Company acquired a piece of machinery and...

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