Question

On March 27, 2020, Single Corporation purchased a delivery van from Couple Corporation by issuing a 2-year, $60,000, non-interest-bearing note. The full balance is due in 2 years. Single would normally borrow at a rate of 7%.

Required

For what amount should Single debit the van? Round to the nearest dollar.

What amount should Single record as interest expense on December 31, their year-end? Round to the nearest dollar.

Answer 1

For what amount should Single debit the van?

		Present value of money:	=	FV/ (1+r) ^N
Input
FV		Future value	FV=	$               60,000
I		Rate of interest	r=	7%
N		Number of years	N=	2
PV		Present value	=	60000/ (1+0.07)^2
PMT not applicable		=	$         52,406.32

Van is debited for $52,406.32

What amount should Single record as interest expense on December 31, their year-end?

Interest expense = $52,406.32 * 7% = 3,668.44

please rate.