On September 1, 2014, Reta Corporation purchased equipment for $30,000 by signing a two-year note payable with a face value of $30,000 due on September 1, 2016. The going rate of interest for this level of risk was 8%. The company has a December 31 year end.
Instructions
(a) Calculate the cost of the equipment assuming the note is as follows:
1. An 8% interest-bearing note, with interest due each September 1.
2. A 2% interest-bearing note, with interest due each September l.
3. A non- interest-bearing note.
(b) Record all journal entries from September 1, 2014, to September 1, 2016, for the three notes in (a). Ignore depreciation of the equipment.