Omega-T sells equipment to Omicron Inc. and takes back a 2-year non-interest-bea
ID: 2482063 • Letter: O
Question
Omega-T sells equipment to Omicron Inc. and takes back a 2-year non-interest-bearing note. The note has a face value of $120,000 and is payable in equal quarterly installments, with the first installment due one quarter from the date of sale. Comparable notes have a stated interest rate of 12% compounded quarterly. The equipment originally cost Omega-T $280,000 and has a current book value of $110,000. Record the entry for the sale on Omega-T’s books and prepare the amortization schedule for the note receivable. Record the journal entries for the first quarter.
Explanation / Answer
Annual interest 12% compounded quarterly Effective annual rate=(1+0.12/4)^4-1 = 12.55% Effective quarterly rate = 3.138% Face value of Note 120,000 Issue Price = 120000/1.03138^8= $ 93,719.85 Discount on Note $ 26,280.15 Book Value of equipment $ 110,000.00 Sale value = $ 93,719.85 Loss on Asset sale= $ 16,280.15 Amortization Schedule Period Amortization of discount Discount Face value Carrying value Receipt of Note $ 26,280.15 $ 120,000.00 $ 93,719.85 Q1 2,940.67 23,339.48 $ 120,000.00 $ 96,660.52 Q2 3,033.21 20,306.27 $ 120,000.00 $ 99,693.7 Q3 3,128.39 17,177.88 $ 120,000.00 $ 102,822.1 Q4 3,226.56 13,951.33 $ 120,000.00 $ 106,048.7 Q5 3,327.81 10,623.52 $ 120,000.00 $ 109,376.5 Q6 3,432.23 7,191.28 $ 120,000.00 $ 112,808.7 Q7 3,539.94 3,651.35 $ 120,000.00 $ 116,348.7 Q8 3,651.02 0.33 $ 120,000.00 $ 119,999.7 Sale JV in Omega T-Book Account Title Dr $ Cr $ Equipment 280,000 Accumulated Depreciation -Equipment 170,000.00 Note Receivable 93,719.85 Loss on Sale of Asset 16,280.15
Related Questions
drjack9650@gmail.com
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.