On January 1, Sheffield Corporation issues a $180,000, 10-year non-interest-bearing note to Camden Production for new machinery. The market interest rate is 9% and Camden is to pay $18,000 instalments at the end of each year. Fair value for a purchase of the new machinery in cash is not available from the supplier at this time.

a) Calculate the cost of the machinery:

b) Prepare the journal entry at the date of purchase.

c) Prepare the journal entry(ies) for the first instalment payment on the note on December 31.

d) Independent of Part (c) above, assume the company's year end is October 31.

Answer rating: 100% (QA)

a Calculation of cost of the machinery Cost of machinery or purchase price can be know... View the full answer