Exercise A3-18 (Algorithmic) Present Values

Use Present Value Tables or your calculator to complete the requirements below.

Ramon Company signed notes to make the following two purchases on January 1, 2020:

1. a new truck for $52,000, with payment deferred until December 31, 2021. The appropriate interest rate is 9% compounded annually.
2. a small building from Wandrow Builders. The terms of the purchase require a $75,000 payment at the end of each quarter, beginning March 31, 2020, and ending June 30, 2022. The appropriate interest rate is 2% per quarter.

Required:

Round your answers to the nearest cent, if rounding is required.

1. Complete the information needed to prepare a cash flow diagrams for these two purchases.

a.	n =	years
	i =	% per year

Amount of Payment or Deposit	1/1/20	12/31/21
	Unknown present value amount	$

b.	n =	quarters
	i =	% per quarter

	Amount of Payment or Deposit
1/1/20	3/31/20	6/30/20	9/30/20		6/30/22
Unknown present value amount	$	$	$	. . .	$

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Correct

2. Prepare the entries to record these purchases in Ramon's journal.

a.	Truck
	Note Payable
b.	Building
	Note Payable

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Partially correct

3. Prepare the cash payment and interest expense entries for purchase b at March 31, 2020, and June 30, 2020. If an amount box does not require an entry, leave it blank.

March 31, 2020	Interest Expense
	Note Payable
	Cash
June 30, 2020	Interest Expense
	Note Payable
	Cash

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4. Prepare the adjusting entry for purchase a at December 31, 2020.

Dec. 31, 2020	Interest Expense
	Note Payable