Time Value of Money Help- Accounting

label Accounting
account_circle Unassigned
schedule 1 Day
account_balance_wallet $5

Soriano Corp bought a new machine on 1/1/15, and agreed to pay for it in 5 equal installments of $40,000 on 12/31/2015 and 12/31 of each of the next four years. Assuming that the rate of 8% applies to this contract, how much should Soriano record as the cost of the machine?

B. Prepare the entry that Soriano would make to record the purchase of the machinery if the company signed a note where interest was not included in the face amount of the note.

Apr 28th, 2015

The cost of the machine is recorded as the notes pv:

Dr equip 159,708

Cr payable 159,708

B. Even if the interest was not included in the face amount, it would still be discounted and recorded the same as A. A frequent example of this is coupon free treasury bonds. 

Apr 28th, 2015

Hi! i have a few more questions regarding this question.. I was wondering you could help me with

The first part of the problem has us write the journal entry Soriano would make to record the purchase with the interest included in the face note. DR machinery 159,708.40. DR Premium 40,291.60. CR 200,000

and to prepare the entry/entries required for the first payment.

I have.. DR Interest Expense 12,776. DR Premium 27224. CR Cash 40,000

The last part is How will Soriano's note appear on the 12/31/15 balance sheet?

would this be Note Payable of $160,000?

SO thats section A. Section B wants:

Assume that the interest is not included in the face amount of the note.

what is

a. the cost of the machine

b. journal entry to record the purchase

c. entry/entries required for the first payment

d. presentation of the note on 12/31/15

 if you could help me I would appreciate it very very much!!

Apr 30th, 2015

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Apr 28th, 2015
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