On September 1, 2017, Rupert Ltd. purchased equipment for $30,000 by signing a two-year note payable with a face value of $30,000 due on September 1, 2019. 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, where necessary using any of the three methods (tables, financial calculator, or Excel), 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 1.
3. A non-interest-bearing note.
(b) Record all journal entries from September 1, 2017, to September 1, 2019, for the three notes in (a). Ignore depreciation of the equipment.