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Problem - On December 31, 2009, TERVO Company   accepted Rudolph company's$20,000, 3-year note , paying 6 percent annually on December 31, as full payment for a specialty  piece of equipment. The market rate of interest for similar notes is 10 percent. The following data is provided:

                                                                          Interest Rate

Table Factors For Three Periods                             6%                          10%

Future Value of $1                                                1.19102              1.33100

Present Value of $1                                              .83962                 .75132

Future Value of Ordinary Annuity of $1                   3.18360              3.31000

Present Value of Ordinary Annuity of $1                 2.67301               2.48685

Instructions

(a)  (1) Determine the present value of the note.(show calculations) and (2) Make the appropriate journal entry for TERVO Company on December 31, 2009. Round answers to the nearest dollar.

(b) Make the appropriate journal entry for TERVO Company on December 31, 2010. Round answers to the nearest dollar (show calculation).

(C) make the appropriate journal entry for TERVO Company on December 31, 2011. Round answers to the nearest dollar (show calculation).

(D) make the appropriate journal entry for TERVO Company on December 31, 2012. Assuming the note (and interest ) is paid in full on that date(show calculations).

Accounting Basics, Accounting

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