Tamarisk Inc. has decided to purchase equipment from Central Michigan Industries on January 2, 2025, to expand its production capacity to meet customers' demand for its product. Tamarisk issues an $1,680,000, 5-year, zero-interest-bearing note to Central Michigan for the new equipment when the prevailing market rate of interest for obligations of this nature is 12%. The company will pay off the note in five $336,000 installments due at the end of each year over the life of the note. (a) Prepare the journal entry at the date of purchase. (Round factor values to 5 decimal places, e.g. 1.25124 and final answers to 0 decimal places 5.275 Credit account titles are automatically indented u mount is entered Do not indent manually If no ontrui

Tamarisk Inc. has decided to purchase equipment from Central Michigan Industries on January 2, 2025, to expand its production capacity to meet customers' demand for its product. Tamarisk issues an $1,680,000, 5-year, zero-interest-bearing note to Central Michigan for the new equipment when the prevailing market rate of interest for obligations of this nature is 12%. The company will pay off the note in five $336,000 installments due at the end of each year over the life of the note. (a) Prepare the journal entry at the date of purchase. (Round factor values to 5 decimal places, e.g. 1.25124 and final answers to 0 decimal places 5.275 Credit account titles are automatically indented u mount is entered Do not indent manually If no ontrui

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Headland Inc. has decided to purchase equipment from Central Michigan Industries on January 2, 2025, to expand its production capacity to meet customers' demand for its product. Headland issues an $640,000, 5-year, zero-interest-bearing note to Central Michigan for the new equipment when the prevailing market rate of interest for obligations of this nature is 7%. The company will pay off the note in five $128.000 installments due at the end of each year over the life of the note. T - Your answer is partially correct Prepare the journal entry at the date of purchase. (Round factor values to 5 decimal places, e.g. 1.25124 and final answers to 0 decimal places, e.g. 5,275. Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter O for the amounts. List all debit entries before credit entries.) Account Titles and Explanation Equipment Discount on Hobes Payable Notes Payable…
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Pharoah Inc. has decided to purchase equipment from Central Michigan Industries on January 2, 2020, to expand its production capacity to meet customers' demand for its product. Pharoah issues a(n) $1,520,000, 5-year, zero-interest- bearing note to Central Michigan for the new equipment when the prevailing market rate of interest for obligations of this nature is 12%. The company will pay off the note in five $304,000 installments due at the end of each year over the life of the note. Prepare the journal entry at the date of purchase.
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Blue Inc. has decided to purchase equipment from Central industries on January 2, 2022, to expand its production capacity to meet customers' demand for its product. Blue issues a $810,000, 5-year, zero-interest-bearing note to Central for the new equipment when the prevailing market rate of interest for obligations of this nature is 11%. The company will pay off the note in five $162,000 installments due at the end of each year over the life of the note. (a) Prepare the journal entry at the date of purchase. (Round factor values to 5 decimal places, eg. 1.25124 and final answers to O decimal places, eg. 5,275. Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter O for the amounts.) Account Titles and Explanation Debit Credit
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The following problem requires present value information: Biotech sold a patent on a new blood analyzer to Pharma. The sales agreement which was signed on January 1, 2019 requires Pharma to pay Biotech $1 million immediately. In addition, Pharma is required to pay $700,000 each December 31 for 20 years starting with December 31, 2019. Pharma and Biotech judge that a 9 percent is an appropriate interest rate for this arrangement. (a) Compute the present value of the receivable on Biotech’s books on January 1, 2019 immediately after receiving the $1 million down payment. (b) Compute the present value of the receivable on Biotech’s books on December 31, 2019 Enter your answer(s) in the following format rounded off to the nearest dollar (c) Compute the present value of the receivable on Biotech’s books on December 31, 2020
On February 1, 2020, M-Way took out a loan from State Bank for $300,000. It was a 2-year note at 5% interest, payable in 24 months with no payments due until then. Immediately, M-Way transferred $150,000 of it to An Co., a company that sells high tech equipment. This represented a 50% down payment on an agreed upon $300k total contract to buy technology equipment. The remainder was put in a money market fund earning 1.2% interest until October 1, 2020 when the final payment was due to An Co. On Oct 1 the remaining money was transferred from M-Way to An Co. Instructions Please prepare journal entries for the transactions described above.
Apollo Medical Supplies Ltd borrowed $25 million to finance an investment in a laboratory for developing and testing surgical supplies on 1 July 2019. The loan is due 30 June 2029. The lender insisted on a debt covenant in the loan agreement, specifying that the leverage ratio not exceed 60%. Apollo Medical Supplies Ltd complied with the requirement in 2020 when the ratio of total liabilities to total tangible assets was 58%. Apollo Medical Supplies Ltd also invested in plant and equipment used exclusively to manufacture polyester surgical masks. However, due to a decline in demand for polyester surgical masks, analysts are predicting that the company may need to write-down some of its plant and equipment. Requireda) Debt covenants or restrictions are commonly used in lending agreements. Discuss how they are used to reduce agency problems that exist in the relationship between management and lenders.b) Why would management choose to enter into a lending agreement that contains a…
On December 30, 2021, Jack company purchased an aircraft from Jill Co. in exchange for a noninterest bearing note requiring 10 payments of 450,000. The first payment was made on December 30, 2021, and the others are due annually on December 30. At the date of issuance, the prevailing rate of interest for this type of note was 12%. How much is the cost of the machine?
On January 1, 2021, Dreamlover Corporation purchased equipment from Daydream Company for P3,600,000. Term of payments includes issuing a 5-year noninterest-bearing note payable equally every end of the year. The effective interest rate is 15%. The entity used 2 decimal places for the PVF. Requirements: How much is the initial cost of the equipment?