On January 3, 2104 a business received a $40,000 non-interest bearing note in payment for the...

On January 3, 2104 a business received a $40,000 non-interest bearing note in payment for the sale of a piece of used equipment. The cost of the equipment was $100,000 and its book value at the date of the sale was $20,000. The note will be settled with one payment due January 3, 2018. No interest rate is stated on the note but 8% is considered realistic for this kind of transaction.

1)Compute the discount for this note and determine the gain or loss to be recorded at the sale of the asset.

2) Journalize the sale of the equipment on the books of the business selling the equipment on Jan 3, 2014

3) Prepare an amortization schedule for the discount and prepare any entry or entries required for this note for the remainder of 2014 and 2015

4) Show how this note would be presented in the financial statement at 12/31/14

5) How would your answer to part 1 change if this note was to be settled in 4 even payments of $10,000 each iwth the first payment due 1/3/14

Expert Solution

ekkarill92 answered 8 months ago

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