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Question #1 (25 marks) On January 1, 2019, Farmer Co. sold product to a customer in...

Question #1

On January 1, 2019, Farmer Co. sold product to a customer in exchange for a four-year $50,000 promissory note with an annual interest rate of 4%. Interest only payments are due SEMI-ANNUALLY, beginning on June 30, 2019. The market rate for an equivalent loan to this customer would have been 6%*.

Farmer Co. uses IFRS, has a Dec 31 year end, and prepares adjusting entries annually.

Required:

  1. Calculate the amount of revenue to be recorded on January 1st 2019 by Farmer Co for the sale of the product.
  1. Calculate using the present value tables in the textbook.
  2. Calculate using EXCEL “PV” formula. Copy your Excel formula to another cell as text so it can be viewed (put ‘ in front of it for text.) (Remember that the payment and the future value must be negative.)
  1. Prepare the journal entries for Farmer Co. at Jan 1, 2019, June 30, 2019, and Dec 31, 2019. (Show all calculations.)
  2. Prepare the note amortization schedule. Be sure to show the all the semi-annual interest payments and the payment of the note on Jan 1, 2023.
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