Garcia Corporation purchased a truck by issuing an $80,000, 4-year, zero-interest-bearing note to Equinox Inc. The market rate o

Question

3 years ago

5

f interest for obligations of this nature is 10%. Prepare the journal entry to record the purchase of this truck

1 answer:

Yuliya22 [10] · Answer 1 · 2022-03-01T22:54:43+03:00

Answer: See explanation

Explanation:

The journal entry to record the purchase of the truck will be:

Dr Trucks $54641

Dr Discount on Notes Payable $25359

Cr Notes Payable $80000

Note:

Face value of Note = $80000

× PV factor = 1/1.10⁴ = 0.68301

Present value of Face value of Note = $54641