P14-13 Note and installment note with unrealistic interest rate - EXCEL TEMPLATE
P14-13
Braxton Technologies, Inc., constructed a conveyor for A&G Warehousers that
was completed and ready for use on January 1, 2011. A&G paid for the
conveyor by issuing a $100,000, four-year note that specified 5% interest to be
paid on December 31 of each year, and the note is to be repaid at the end of
four years. The conveyor was custom-built for A&G, so its cash price was
unknown. By comparison with similar transactions it was determined that a
reasonable interest rate was 10%.
1.
Prepare the journal entry for A&G's purchase of the conveyor on January 1,
2011.
2.
Prepare an amortization schedule for the four-year term of the note.
3.
Prepare the journal entry for A&G's third interest payment on December 31,
2013.
4.
If A&G's note had been an installment note to be paid in four equal
payments at the end of each year beginning December 31, 2011, what would be the
amount of each installment?
5.
Prepare an amortization schedule for the four-year term of the installment
note.
6.
Prepare the journal entry for A&G's third installment payment on December
31, 2013.
File name: P14-13-Braxton-Technologies.xls File type: application/vnd.ms-excel Price: $9
