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Exercise 1.1: Downpayment Present Value of Note (200,000 X 3.17 Pvoa) Total Cost

The document contains several journal entries recording transactions between 2020 and 2021: - In 2020, equipment was purchased for $580,000 with $200,000 cash and a $500,000 note payable. Interest expense of $40,000 was recorded along with amortization of the note discount. - Also in 2020, machinery was purchased for $734,000 with a $100,000 downpayment and $800,000 note. Interest expense of $63,400 and note principal payment of $200,000 were recorded. - In 2021, the remaining note payable of $100,000 was paid off, with interest expense of $32,000. So in summary,

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90 views5 pages

Exercise 1.1: Downpayment Present Value of Note (200,000 X 3.17 Pvoa) Total Cost

The document contains several journal entries recording transactions between 2020 and 2021: - In 2020, equipment was purchased for $580,000 with $200,000 cash and a $500,000 note payable. Interest expense of $40,000 was recorded along with amortization of the note discount. - Also in 2020, machinery was purchased for $734,000 with a $100,000 downpayment and $800,000 note. Interest expense of $63,400 and note principal payment of $200,000 were recorded. - In 2021, the remaining note payable of $100,000 was paid off, with interest expense of $32,000. So in summary,

Uploaded by

Kailah Calinog
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© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as XLSX, PDF, TXT or read online on Scribd
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EXERCISE 1.

1
Required: Journal entries for 2020 and 2021

2020
Jan 1 Equipment 580,000
Discount on Note payable 120,000
Cash 200,000
Note payable 500,000
Dec 31 Note payable 100,000
Cash 100,000
31 Interest expense 40,000
Discount on note payable 40,000

Note payable Fraction Amortization


2017 500,000 5/15 40,000
2018 400,000 4/15 32,000
2019 300,000 3/15 24,000
2020 200,000 2/15 16,000
2021 100,000 1/15 8,000
1,500,000 120,000

2021
Dec 31 Note payable 100,000
Cash 100,000
31 Interest expense 32,000
Discount on note payable 32,000

EXERCISE 2.2
Required: Journal entries for 2020 and 2021

2020
Jan 1 Machinery 734,000 Downpayment
Discount on Note payable 166,000 Present Value of note (200,000 x 3
Cash 100,000 Total cost
Note payable 800,000
Dec 31Note payable 200,000
Cash 200,000
Dec 31Interest expense 63,400
Discount on Note payable 63,400

Date Payment 10% interest Principal Present Value


1/1/2017 634,000
12/31/2017 200,000 63,400 136,600 497,400
12/31/2018 200,000 49,740 150,260 347,140
12/31/2019 200,000 34,714 165,286 181,854
12/31/2020 200,000 18,146 181,854

2021
Dec 31 Note payable 200,000
Cash 200,000
31 Interest expense 49,740
Discount on note payable 49,740

EXERCISE 2.1
Required: Prepare Journal entries to record the transaction
1.
Computer 430,000
Inventory 300,000
Cash 50,000
Gain on exchange 80,000
2.
Machinery - new 140,000 (110,000 + 30,000)
Accumulated depreciation 120,000
Loss on exchange 10,000
Machinery - old 240,000
Cash 30,000

Fair value of asset given 110,000


Carrying amount 120,000
Loss on exchange (10,000)
3.
Equipment - new 1,000,000
Loss on exchange 200,000
Accumulated depreciation 1,800,000
Equipment - old 3,000,000

EXERCISE 2.2
Required: Prepare Journal entry on the books of Smile and Frown

Smile
Equipment - new 500,000
Accumulated depreciation 2,000,000
Equipment - old 2,400,000
Gain on exchange 100,000
Frown
Equipment - new 500,000
Accumulated depreciation 1,750,000
Equipment - old 2,200,000
Gain on exchange 50,000
wnpayment 100,000
sent Value of note (200,000 x 3.17 PVoa) 634,000
734,000
0,000 + 30,000)

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