Present Values

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

Phillips Enterprises signed notes to make the following two purchases on January 1, 2020:

1. new piece of equipment for $60,000, with payment deferred until December 31, 2021. The appropriate interest rate is 9% compounded annually.
2. small building from Richter Construction. 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.

6. 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 Phillips' journal.

   2020 Jan. 1	Equipment
   	Notes Payable
   	(Record purchase of equipment)
   2020 Jan. 1	Building
   	Notes Payable
   	(Record purchase of building)

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   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
   	Notes Payable
   	Cash
   	(Record loan payment)
   June 30, 2020	Interest Expense
   	Notes Payable
   	Cash
   	(Record loan payment)

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   Partially correct

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

   Dec. 31, 2020	Interest Expense
   	Notes Payable
   	(Record accrued interest expense)