Question

At January 1, 2021, Brant Cargo acquired equipment by issuing a five-year, $180,000 (payable at maturity), 6% note. The market rate of interest for notes of similar risk is 11%. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) (Use appropriate factor(s) from the tables provided.)

Required:

1. to 3. Prepare the necessary journal entries for Brant Cargo. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Round your final answers to the nearest whole dollar)

Answer 1

Journal Entry

Date	General Journal	Debit ($)	Credit ($)
Jan 1,2021	Equipement	146657
	Discount on notes payable	33343
	To Note Payable		180000
Dec 31,2021	Interest Expense	16132
	To Discount on notes payable		5332
	To Cash		10800
Dec 31, 2022	Interest Expense	16735
	To Discount on notes payable		5935
	To Cash		10800

Workings :-

Present Value of $1 at 11%

0.901

0.812

0.731

0.659

0.593

Equipement (Present Value) = [(180000 * 0.593) + (180000 * 6% * 3.696) ]

= (106740 + 39917)

= $146657

Interest Exp (Dec 31,2021 ) = (146657 * 11% )

= $16132

Interest Exp (Dec 31, 2022 ) = [ (180000 *0.659) + (180000 * 6% * 3.103)] * 11%

= (118620 + 33512 ) * 11%

= $16735