# (Solved Homework): Can you please explain calculations as you go? Thank you!…

Can you please explain calculations as you go? Thank you!

Exercise 14-16

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(Solved Homework): Can you please explain calculations as you go? Thank you!…
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On January 1, 2017, Nash Company makes the two following acquisitions.

1. Purchases land having a fair value of \$360,000 by issuing a 4-year, zero-interest-bearing promissory note in the face amount of \$566,467.
2. Purchases equipment by issuing a 7%, 9-year promissory note having a maturity value of \$520,000 (interest payable annually on January 1).

The company has to pay 12% interest for funds from its bank.

(a) Record the two journal entries that should be recorded by Nash Company for the two purchases on January 1, 2017.
(b) Record the interest at the end of the first year on both notes using the effective-interest method.

(Round present value factor calculations to 5 decimal places, e.g. 1.25124 and the final answer to 0 decimal places e.g. 58,971. If no entry is required, select “No Entry” for the account titles and enter 0 for the amounts. Credit account titles are automatically indented when amount is entered. Do not indent manually.)

No.
Date
Account Titles and Explanation
Debit
Credit
(a) 1.
January 1, 2017
2.
January 1, 2017
(b) 1.
December 31, 2017
2.
December 31, 2017

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## Expert Answer

 a) January 1, 2017 1) Land \$ 3,60,000 Discount on notes payable \$ 2,06,467 Notes payable \$ 5,66,467 (To record purchase of land by issuing note payable) PV of 566467 discounted at 12% = 566467/1.12^4 = \$ 3,60,000 2) Equipment \$ 3,81,466 Discount on notes payable \$ 1,38,534 Notes payable \$ 5,20,000 (To record purchase of equipment by issuing note payable) PV of the face value of the note = 520000*0.36061 = \$ 1,87,517 PV of the interest = 520000*7%*5.32825 = \$ 1,93,948 Total PV \$ 3,81,466 b) January 31, 2017. 1) Interest expense (\$360000*12%) \$      43,200 Discount on notes payable \$      43,200 2) Interest expense (381466*12%) \$      45,776 Discount on notes payable \$      16,624 Cash (520000*12%) \$      62,400

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