On January 1, 2018, Byner Company purchased a used tractor. Byner paid $5,000 down and signed a noninterest-bearing note requiring $25,000 to be paid on December 31, 2020. The fair value of the tractor is not determinable. An interest rate of 10% properly reflects the time value of money for this type of loan agreement. Thecompany’s fiscal year-end is December 31.Required:1. Prepare the journal entry to record the acquisition of the tractor. Round computations to the nearest dollar.2. How much interest expense will the company include in its 2018 and 2019 income statements for this note?3. What is the amount of the liability the company will report in its 2018 and 2019 balance sheets forthis note?

Intermediate Accounting: Reporting And Analysis
3rd Edition
ISBN:9781337788281
Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Chapter13: Investments And Long-term Receivables
Section: Chapter Questions
Problem 10MC: On January 1, 2019, Park Company accepted a 36,000, non-interest-bearing, 3-year note from a major...
icon
Related questions
Question

On January 1, 2018, Byner Company purchased a used tractor. Byner paid $5,000 down and signed a noninterest-bearing note requiring $25,000 to be paid on December 31, 2020. The fair value of the tractor is not determinable. An interest rate of 10% properly reflects the time value of money for this type of loan agreement. The
company’s fiscal year-end is December 31.
Required:
1. Prepare the journal entry to record the acquisition of the tractor. Round computations to the nearest dollar.
2. How much interest expense will the company include in its 2018 and 2019 income statements for this note?
3. What is the amount of the liability the company will report in its 2018 and 2019 balance sheets for
this note?

Expert Solution
trending now

Trending now

This is a popular solution!

steps

Step by step

Solved in 3 steps with 6 images

Blurred answer
Knowledge Booster
Accounting for Notes
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.
Similar questions
  • SEE MORE QUESTIONS
Recommended textbooks for you
Intermediate Accounting: Reporting And Analysis
Intermediate Accounting: Reporting And Analysis
Accounting
ISBN:
9781337788281
Author:
James M. Wahlen, Jefferson P. Jones, Donald Pagach
Publisher:
Cengage Learning