Purchase Solution

Fenton Company: imputed interest on non-interest-bearing

Not what you're looking for?

Ask Custom Question

On December 31, 2011, Fenton Company sold equipment to Denver, Inc., accepting a $275,000 noninterest-bearing note receivable in full payment on December 31, 2014. Denver, Inc., normally pays 12% for its borrowed funds. The equipment is carried in Fenton's perpetual inventory records at 65% of its cash selling price.

1.) Prepare Fenton's journal entries to record the sale on December 31, 2011.
2.) Prepare Fenton's journal entry on December 31, 2012, necessitated by this transaction. (Hint: Prepare an amortization schedule for the loan.)
3.) Show Fenton's balance sheet presentation of Denber's note at December 31, 2012.

Purchase this Solution
Solution Summary

Your tutorial is attached in Excel (click in cells to see computations). It shows how to solve for present value, which is the proxy for sales price, and then shows an amortization schedule through maturity and the journal entries for 2011 and 2012. The balance sheet presentation for the note is shown.

Solution Preview

Your tutorial is attached in Excel (click in cells to see computations). ...

Solution provided by:
Carol Sargent, PhD
Education
  • BSc, University of Virginia
  • MSc, University of Virginia
  • PhD, Georgia State University
Recent Feedback
  • "hey just wanted to know if you used 0% for the risk free rate and if you didn't if you could adjust it please and thank you "
  • "Thank, this is more clear to me now."
  • "Awesome job! "
  • "ty"
  • "Great Analysis, thank you so much"
Purchase this Solution
Free BrainMass Quizzes
Operations Management

This quiz tests a student's knowledge about Operations Management

MS Word 2010-Tricky Features

These questions are based on features of the previous word versions that were easy to figure out, but now seem more hidden to me.

Lean your Process

This quiz will help you understand the basic concepts of Lean.

Balance Sheet

The Fundamental Classified Balance Sheet. What to know to make it easy.

Income Streams

In our ever changing world, developing secondary income streams is becoming more important. This quiz provides a brief overview of income sources.

View More Free Quizzes
Related BrainMass Solutions

  • Aging Accounts Receivable & Imputed Interest

    577402 Aging Accounts Receivable & Imputed Interest On December 31, 2011, Vale Company had an unadjusted credit balance of $1,000 in its Allowance for uncollectible accounts.

  • Acme Company

    467334 Acme Company: Entries for Non-Interest-Bearing Notes On January 1, 2013, Acme Company makes the two following acquisitions.

  • Accounting for a Non-interest Bearing Note

    This solution cites specific sections of the FASB Codification to discuss the treatment of a non-interest bearing note given in exchange for equipment, including how to present it on the balance sheet.

  • Notes receivable

    254389 Notes Receivables, interest revenue and more (Gale Sondergaard Company) (Reporting of Notes Receivable, Interest, and Sale of Receivables) On July 1, 2007, Gale Sondergaard Company sold special-order merchandise on credit and received in return

  • GAAP for zero-interest-bearing note

    384167 GAAP for zero-interest-bearing note Wie Company has been operating for just 2 years, producing specialty golf equipment for women golfers.

  • Non-Interest-Bearing Promissory Note

    536282 Non-Interest-Bearing Promissory Note If an employee receives a non-interest-bearing promissory note from his employer as compensation, how much income does that employee have to include in his income?

  • Business Math : Non-interest Bearing Note

    The proceeds from non-interest bearing note is calculated. An explanation of non-interest bearing notes is included.

  • Sales margin, capital turnover, ROI, residential income

    avg cost of capital 14% Imputed interest is 24% Tax rate is 18% What is: a) sales margin b) capital turnover c) ROI d) residual income using imputed rate a) Sales Margin = Operating Income / Sales = $90,000 / $900,000 = 0.10 0r 10%

  • Bonds

    63410 Bearing and Non-Interest Bearing Bonds 1. Why would a company issue bonds that require interest payments if bonds that do not require interest payments are being sold in an open market?

View More Related Solutions