On January 1, 2024, Byner Company purchased a used tractor. Byner paid $5,000 down and signed a
Question:
On January 1, 2024, Byner Company purchased a used tractor. Byner paid $5,000 down and signed a noninterest-bearing note requiring $25,000 to be paid on December 31, 2026. The fair value of the tractor is not determinable.
An interest rate of 10% properly reflects the time value of money for this type of loan agreement. The company’s fiscal year-end is December 31.
Required:
1. Prepare the journal entry to record the acquisition of the tractor. Round computations to the nearest dollar.
2. How much interest expense will the company include in its 2024 and 2025 income statements for this note?
3. What is the amount of the liability the company will report in its 2024 and 2025 balance sheets for this note?
Step by Step Answer:
Requirement 1 Tractor 5000 cash 18783 present value ...View the full answer
Related Video
The time value of money (TVM) is the concept that the money you have in your pocket today is worth more than the same amount would be if you received it in the future because of the profit it can earn during the interim.
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