Question

Tamarisk Corporation purchased a truck by issuing an $84,000, four-year, non–interest-bearing note to Equinox Inc. The market interest rate for obligations of this nature is 12%.

Click here to view the factor table PRESENT VALUE OF 1.
Click here to view the factor table PRESENT VALUE OF AN ANNUITY OF 1.

Prepare the journal entry to record the truck purchase. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts. Round factor values to 5 decimal places, e.g. 1.25124 and final answers to 0 decimal places,e e.g. 5,275.)

Account Titles and Explanation	Debit	Credit

Answer 1

Answer:

Account title	Debit ($)	credit ($)
Truck	53,384
Discount on notes payable	30,616
Notes payable		84,000

working note:

Present value of Note :PVF12%,4* Face value of note

                   = 0.63552* 84000

                   = 53383.68 (rounded to 53384)

Find PVF from present value factor table or using the formula 1/(1+i)^n where i= 12% ,n=4