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In: Accounting

At the beginning of 2018, VHF Industries acquired a equipment with a fair value of $9,947,400...

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?

Interest rate %

.

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.

Date General Journal Debit Credit
January 01, 2018

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