At the beginning of 2021, VHF Industries acquired a machine with a fair value of $6,074,700 by issuing a four-year, noninterest-bearing note in the face amount of $8 million. The note is payable in four annual installments of $2 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 entries. When recording the issuance of the installment note record it at its net book value in a single note payable (or receivable) account (no Discount). 5. Suppose the market value of the machine was unknown at the time of purchase, but the market rate of interest for notes of similar risk was 11%. Prepare the journal entry to record the purchase of the machine.
At the beginning of 2021, VHF Industries acquired a machine with a fair value of $6,074,700 by issuing a four-year, noninterest-bearing note in the face amount of $8 million. The note is payable in four annual installments of $2 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 entries. When recording the issuance of the installment note record it at its net book value in a single note payable (or receivable) account (no Discount).
5. Suppose the market value of the machine was unknown at the time of purchase, but the market rate of interest for notes of similar risk was 11%. Prepare the
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The long-term liability section of Eastern Post Corporation’s balance sheet as of December 31, 2023, included 10% bonds having a face amount of $40 million and a remaining premium of $6 million. On January 1, 2024, Eastern Post retired some of the bonds before their scheduled maturity.
Required:
Prepare the
- Eastern Post called half the bonds at the call price of 102 (102% of face amount).
- Eastern Post repurchased $10 million of the bonds on the open market at their market price of $10.5 million.
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