Brief Exercise 14-10 (Algo) Note with unrealistic interest rate [LO14-3] On January 1, Snipes Construction paid for earth-moving equipment by issuing a $380,000, 5-year note that specified 4% interest to be paid on December 31 of each year. The equipment’s retail cash price was unknown, but it was determined that a reasonable interest rate was 7%. Note: Use tables, Excel, or a financial calculator. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) At what amount should Snipes record the equipment and the note? What journal entry should it record for the transaction?

Brief Exercise 14-10 (Algo) Note with unrealistic interest rate [LO14-3] On January 1, Snipes Construction paid for earth-moving equipment by issuing a $380,000, 5-year note that specified 4% interest to be paid on December 31 of each year. The equipment’s retail cash price was unknown, but it was determined that a reasonable interest rate was 7%. Note: Use tables, Excel, or a financial calculator. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) At what amount should Snipes record the equipment and the note? What journal entry should it record for the transaction?

Financial Reporting, Financial Statement Analysis and Valuation

8th Edition

ISBN:9781285190907

Author:James M. Wahlen, Stephen P. Baginski, Mark Bradshaw

Publisher:James M. Wahlen, Stephen P. Baginski, Mark Bradshaw

Chapter7: Financial Activities

Section: Chapter Questions

Problem 23PC

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Brief Exercise 14-10 (Algo) Note with unrealistic interest rate [LO14-3]

On January 1, Snipes Construction paid for earth-moving equipment by issuing a $380,000, 5-year note that specified 4% interest to be paid on December 31 of each year. The equipment’s retail cash price was unknown, but it was determined that a reasonable interest rate was 7%.

Note: Use tables, Excel, or a financial calculator. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1)

At what amount should Snipes record the equipment and the note?

What journal entry should it record for the transaction?

Definition Definition Method of recording financial transactions in the book of original entry by debiting and crediting the accounts affected by a transaction using the golden rules of accrual accounting.

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