In: Accounting
At the beginning of
2018, VHF Industries acquired a equipment with a fair value of
$9,947,400 by issuing a three-year, noninterest-bearing note in the
face amount of $12 million. The note is payable in three annual
installments of $4 million at the end of each year. (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.
What is the effective rate of interest implicit in the
agreement?
2. to 4. Prepare the necessary journal
entry.
5. Suppose the market value of the equipment was
unknown at the time of purchase, but the market rate of interest
for notes of similar risk was 9%. Prepare the journal entry to
record the purchase of the equipment.
Required 1
Required 2 to 4
Required 5
What is the effective rate of interest implicit in the agreement?
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Journal Entries.
1. Record the purchase of the equipment.
2. Record the interest expense.
3. Record the interest expense.
Suppose the market value of the equipment was unknown at the time of purchase, but the market rate of interest for notes of similar risk was 9%. Prepare the journal entry to record the purchase of the equipment. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Enter your answers in whole dollar.)
Journal entry worksheet
Record the purchase of equipment.
Note: Enter debits before credits.
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