Problems 8-8 Imputing interest on a nominal interest-bearing note and fair value option (LO 8-4, LO 8-5)

On January 2, 2017, Criswell Acres purchased from Mifflinburg Farm Supply a new tractor that had a cash selling price of $109,837. As payment, Criswell gave Mifflinburg Farm Supply $25,000 in cash and a $100,000, five-year note that provided for annual interest payments at 6%. At the time of the sale, the interest rate normally charged to farms with Criswells credit rating is 10%. Use the following links to the present value tables to calculate answers. (PV of 1, PVAD of 1, and PVOA of 1) (Use the appropriate factor(s) from the tables provided.)

Required:

Prepare Mifflinburg Farm Supplys journal entry to record the sale.

Prepare the journal entry to record the first interest payment Mifflinburg Farm Supply received on December 31, 2017.

Determine the note receivable balance that Mifflinburg Farm Supply will report on December 31, 2018.

Determine Mifflinburg Farm Supplys note receivable balance on December 31, 2018, assuming that the company reports notes receivable at fair value and the relevant rate of interest at that time has fallen to 8%. Assume that the December 31, 2018, interest payment has been made.

Complete this question by entering your answers in the tabs below.

Req 1 and 2

1. Prepare Mifflinburg Farm Supplys journal entry to record the sale. 2. Prepare the journal entry to record the first interest payment Mifflinburg Farm Supply received on December 31, 2017.

(If no entry is required for a particular transaction, select "No journal entry required" in the first account field. Round your final answers to the nearest whole dollar.)

Journal entry worksheet

Prepare the entry for the sale of the tractor.

Date	General Journal	Debit	Credit
01/02/2017

Prepare the entry for the first payment received on the ntoe.

Note: Enter debits before credits.

Date	General Journal	Debit	Credit
12/31/2017

Req 3 and 4

Complete this question by entering your answers in the tabs below.

3. Determine the note receivable balance that Mifflinburg Farm Supply will report on December 31, 2018. 4. Determine Mifflinburg Farm Supplys note receivable balance on December 31, 2018, assuming that the company reports notes receivable at fair value and the relevant rate of interest at that time has fallen to 8%. Assume that the December 31, 2018, interest payment has been made.

(Round your final answers to the nearest whole dollar.)

(Round your final answers to the nearest whole dollar.)

3.	Notes receivable balance
4.	Total fair value