How much interest expense will the company

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Acquisition cost; noninterest bearing note:

On January 1, 2019, Byner Company purchased a used tractor. Byner paid $10,000 down and signed a noninterest bearing note requiring $25,000 to be paid on December 31, 2021. The fair value of the tractor is not determinable. An interest rate of 10% properly reflects the time value of money for this type of loan agreement. The company's fiscal year-end is December 31.

Required:

Question 1. Prepare the journal entry to record the acquisition of the tractor. Round computation to the nearest dollar.

Question 2. How much interest expense will the company include in its 2019 and 2020 income statements for this note?

Question 3. What is the amount of the liability the company will report in its 2018 and 2020 balance sheets for this note?

Reference no: EM132497842

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