Garcia Corporation purchased a truck by issuing an $252,000, 5-year, zero-intere

Question

Garcia Corporation purchased a truck by issuing an $252,000, 5-year, zero-interest-bearing note to Equinox Inc. The market rate of interest for obligations of this nature is 11%.

Prepare the journal entry to record the purchase of this truck. (Round answers to 0 decimal places, e.g. 5,275. Credit account titles are automatically indented when 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.)

Account Titles and Explanation

Debit

Credit

Account Titles and Explanation

Debit

Credit

Trucks

??

Discount on Notes Payable

??

                  Notes Payable

          252000

Explanation / Answer

Journal entry

Present Value of Note Payable Maturity Value (FV) 252000 Years to maturity 5 Market Interest rate 11% Present Value: 252000*(1/(1+0.11)^5 149550

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