Question

At January 1, 2018, Brant Cargo acquired equipment by issuing a four-year, $200,000 (payable at maturity), 5% 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 nearest whole dollar)

Answer 1

	Date	Account Titles	Debit $	Credit $
	January 1, 2018	Equipment	162,771
		Discount on notes payable	37,229
		Note payable		200,000
	December 31, 2018	Interest expense	17,905
		(162,771 x 11% )
		Discount on notes payable		7,905
		Cash ( 200,000 x 5% )		10,000
	December 31, 2019	Interest expense	18,774
		(162,771 + 7,905 ) x 11%
		Discount on notes payable		8,774
		Cash		10,000
	Working:
	Present value of maturity	131,746	(200,000 x 0.65873 )
	Present value of Interest Payment	31,025	( 200,000 x 5% x 3.10245 )
		162,771