On January 1, 2020, Jacobs Company sells land financed through a $16,000 note, issued by Andress Company. The note is a $16,000,
1 answer:
Answer:
Note: <em>See attached picture for journal entry schedule for the question</em>
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Fair Value of Land = -PV(I, N, PMT, FV, Type)
Fair Value of Land = -PV(8%, 2, 16000*4%, 16000, 0)
Fair Value of Land = -PV(8%,2,640,16000,0)
Fair Value of Land = $14,859
Journal Entry
Date Account tile and explanation Debit Credit
Jan. 1 Notes Receivable $16,000
To, Discount on Notes $1,141
To, Land $14,859
Dec. 31 Cash $640
Discount on Notes $549
To, Interest Revenue (14859*8%) $1,189
Dec. 31 Cash $640
Discount on Notes $593
To, Interest Revenue (14859+549)*8% $1,233
Dec. 31 Cash $16,000
To, Notes Receivable $16,000
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Answer:
It is a better deal to keep the old equipment
Explanation:
each year the new equipment generates a 13,700 adidtional cash outflow
We should check if the cost saving per year at 8% will have a present value lower than the proceed from the sale:
C 13,700.00
time 5
rate 0.08
PV $59,076.1377
As the differential cost exceeds the amount of proceed we would get if the old equipment is sold we already conclude we should keep it