NSU COMBO F/INTERM.ACCTG-CONNECT ACCESS
10th Edition
ISBN: 9781266020193
Author: SPICELAND
Publisher: MCG
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Chapter 14, Problem 14.10BE
Note with unrealistic interest rate
• LO14–3
On January 1, Snipes Construction paid for earth-moving equipment by issuing a $300,000, 3-year note that specified 2% interest to be paid on December 31 of each year. The equipment’s retail cash price was unknown, but it was determined that a reasonable interest rate was 5%. At what amount should Snipes record the equipment and the note? What
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Brief Exercise 14-10 (Algo) Note with unrealistic interest rate [LO14-3]
On January 1, Snipes Construction paid for earth-moving equipment by issuing a $380,000, 5-year note that specified 4% interest to be paid on December 31 of each year. The equipment’s retail cash price was unknown, but it was determined that a reasonable interest rate was 7%.
Note: Use tables, Excel, or a financial calculator. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1)
At what amount should Snipes record the equipment and the note?
What journal entry should it record for the transaction?
PROBLEM 5
On January 1, 2021, Son Co. Company purchased a machine for 300,000 in exchange for a 4-year
note. The prevailing note of interest of type is 10%. The new machine was damaged during
installation and the repair cost amounted to 30,000.
Assuming that the machine has an available cash price that equals to the present value of the note
if the note is bears interest at 12% rate.
Required:
1.) How much is the cost of the machine?
2.) How much is the interest expense for the year 2022?
3.) How much is the carrying value of the notes as of December 31, 2024?
Exercise 14-20 (Static) Installment note; amortization schedule [LO14-3]
American Food Services, Incorporated, acquired a packaging machine from Barton and Barton Corporation.
• Barton and Barton completed construction of the machine on January 1, 2024.
• In payment for the $4 million machine, American Food Services issued a four-year installment note to be paid in four equal
payments at the end of each year.
• The payments include interest at the rate of 10%.
Required:
1. Prepare the journal entry for American Food Services' purchase of the machine on January 1, 2024.
2. Prepare an amortization schedule for the four-year term of the installment note.
3. Prepare the journal entry for the first installment payment on December 31, 2024.
4. Prepare the journal entry for the third installment payment on December 31, 2026.
Note: Use tables, Excel, or a financial calculator. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1)
Complete this question by entering your answers…
Chapter 14 Solutions
NSU COMBO F/INTERM.ACCTG-CONNECT ACCESS
Ch. 14 - How is periodic interest determined for...Ch. 14 - As a general rule, how should long-term...Ch. 14 - How are bonds and notes the same? How do they...Ch. 14 - What information is contained in a bond indenture?...Ch. 14 - How is the price determined for a bond (or bond...Ch. 14 - A zero-coupon bond pays no interest. Explain.Ch. 14 - Prob. 14.8QCh. 14 - Compare the two commonly used methods of...Ch. 14 - Prob. 14.10QCh. 14 - When a notes stated rate of interest is...
Ch. 14 - How does an installment note differ from a note...Ch. 14 - Prob. 14.13QCh. 14 - Prob. 14.14QCh. 14 - Air Supply issued 6 million of 9%, 10-year...Ch. 14 - Both convertible bonds and bonds issued with...Ch. 14 - Prob. 14.17QCh. 14 - Cordova Tools has bonds outstanding during a year...Ch. 14 - If a company prepares its financial statements...Ch. 14 - (Based on Appendix 14A) Why will bonds always sell...Ch. 14 - Prob. 14.21QCh. 14 - Prob. 14.22QCh. 14 - Prob. 14.23QCh. 14 - Bank loan; accrued interest LO132 On October 1,...Ch. 14 - Non-interest-bearing note; accrued interest LO132...Ch. 14 - Determining the price of bonds LO142 A company...Ch. 14 - Determining the price of bonds LO142 A company...Ch. 14 - Effective interest on bonds LO142 On January 1, a...Ch. 14 - Effective interest on bonds LO142 On January 1, a...Ch. 14 - Straight-line interest on bonds LO142 On January...Ch. 14 - Investment in bonds LO142 On January 1, a company...Ch. 14 - Note with unrealistic interest rate LO143 On...Ch. 14 - Installment note LO143 On January 1, a company...Ch. 14 - Prob. 14.12BECh. 14 - Bonds with detachable warrants LO145 Hoffman...Ch. 14 - Convertible bonds LO145 Hoffman Corporation...Ch. 14 - Prob. 14.22ECh. 14 - Prob. 14.36ECh. 14 - Prob. 14.14PCh. 14 - Prob. 14.17PCh. 14 - Prob. 14.21PCh. 14 - Prob. 14.3DMP
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