On December 31, 2016, Tangerine Corp. sold product to Orange Limited, accepting a 3%, four- year...
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On December 31, 2016, Tangerine Corp. sold product to Orange Limited, accepting a 3%, four- year promissory note of $400,000 in exchange. Interest is payable annually on December 31, starting December 31, 2017. Tangerine Corp. normally pays 6% interest to borrow funds. Orange Limited, however, normally pays 8% to borrow funds. The product sold is carried on Tangerine's books at a manufactured cost of $255,000. Assume Tangerine uses the perpetual inventory system. Instructions On Tangerine's books: a. Prepare the required journal entries to record the transaction at December 31, 2016. Assume that the effective interest method is used. Use the interest tables on the following page (if needed) and round all values to the nearest dollar. b. Prepare all appropriate entries for 2017 in relation to this note. Prepare all appropriate entries for 2018 in relation to this note. C. Table 1 Future Value of 1 T 會 Periods 2% 3% 4% 6% 8% 1 1.02000 1.03000 1.04000 1.06000 1.08000 2 1.04040 1.06090 1.08160 1.12360 1.16640 3 1.06121 1.09273 1.12486 1.19102 1.25971 4 1.08243 1.12551 1.16986 1.26248 1.36049 1.10408 1.15927 1.21665 1.33823 1.46933 Table 2 Present Value of 1 Periods 2% 3% 4% 6% 8% 0.92593 1 0.98039 0.97087 0.96154 0.94340 2 0.96117 0.94260 0.92456 0.89000 0.85734 3 0.94232 0.91514 0.88900 0.83962 0.79383 4 0.92385 0.88849 0.85480 0.79209 0.73503 0.90573 0.86261 0.82193 0.74726 0.68058 Table 3 Future Value of Ordinary Annuity of 1 Periodic Rents 2% 3% 4% 6% 1.00000 2.06000 8% 1 2 1.00000 2.02000 1.00000 2.03000 1.00000 2.04000 1.00000 2.08000 3 3.06040 3.09090 3.12160 3.18360 3.24640 4 4.12161 4.18363 4.24646 4.37462 4.50611 5.20404 5.30914 5.41632 5.63709 5.86660 Table 4 Present Value of Ordinary Annuity of 1 Periodic Rents 2% 3% 4% 6% 8% 0.98039 0.97087 0.96154 0.94340 0.92593 1.94156 1.91347 1.88609 1.83339 1.78326 2.88388 2.82861 2.77509 2.67301 2.57710 3.80773 3.71710 3.62990 3.46511 3.31213 4.71346 4.57971 4.45182 4.21236 3.99271 -23 45 On December 31, 2016, Tangerine Corp. sold product to Orange Limited, accepting a 3%, four- year promissory note of $400,000 in exchange. Interest is payable annually on December 31, starting December 31, 2017. Tangerine Corp. normally pays 6% interest to borrow funds. Orange Limited, however, normally pays 8% to borrow funds. The product sold is carried on Tangerine's books at a manufactured cost of $255,000. Assume Tangerine uses the perpetual inventory system. Instructions On Tangerine's books: a. Prepare the required journal entries to record the transaction at December 31, 2016. Assume that the effective interest method is used. Use the interest tables on the following page (if needed) and round all values to the nearest dollar. b. Prepare all appropriate entries for 2017 in relation to this note. Prepare all appropriate entries for 2018 in relation to this note. C. Table 1 Future Value of 1 T 會 Periods 2% 3% 4% 6% 8% 1 1.02000 1.03000 1.04000 1.06000 1.08000 2 1.04040 1.06090 1.08160 1.12360 1.16640 3 1.06121 1.09273 1.12486 1.19102 1.25971 4 1.08243 1.12551 1.16986 1.26248 1.36049 1.10408 1.15927 1.21665 1.33823 1.46933 Table 2 Present Value of 1 Periods 2% 3% 4% 6% 8% 0.92593 1 0.98039 0.97087 0.96154 0.94340 2 0.96117 0.94260 0.92456 0.89000 0.85734 3 0.94232 0.91514 0.88900 0.83962 0.79383 4 0.92385 0.88849 0.85480 0.79209 0.73503 0.90573 0.86261 0.82193 0.74726 0.68058 Table 3 Future Value of Ordinary Annuity of 1 Periodic Rents 2% 3% 4% 6% 1.00000 2.06000 8% 1 2 1.00000 2.02000 1.00000 2.03000 1.00000 2.04000 1.00000 2.08000 3 3.06040 3.09090 3.12160 3.18360 3.24640 4 4.12161 4.18363 4.24646 4.37462 4.50611 5.20404 5.30914 5.41632 5.63709 5.86660 Table 4 Present Value of Ordinary Annuity of 1 Periodic Rents 2% 3% 4% 6% 8% 0.98039 0.97087 0.96154 0.94340 0.92593 1.94156 1.91347 1.88609 1.83339 1.78326 2.88388 2.82861 2.77509 2.67301 2.57710 3.80773 3.71710 3.62990 3.46511 3.31213 4.71346 4.57971 4.45182 4.21236 3.99271 -23 45
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Related Book For
Intermediate Accounting Reporting and Analysis
ISBN: 978-1285453828
2nd edition
Authors: James M. Wahlen, Jefferson P. Jones, Donald Pagach
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