Oliver, Inc.sellsan old piece of equipmenton December 31st, 2015, agreeing to accept $10,000 in cash with a second payment one month later of $10,000, and a note receivable that pays interest annually and matures 2 years from now of $60,000. The note receivable portion has a stated interest rate of 5%, while similar investments pay a 9% interest rate. Oliver's accounting records show the equipment has a historical cost of $90,000, and a book value of $70,000.
a) Record the journal entries necessary during 2015 (the year of issuance).
b) Record the journal entries necessary during 2016.
c) Record the journal entries necessary during 2017 (the year of maturity).
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From the PV/FV tables, 2 period duration:
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4%
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5%
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9%
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Present value of an ordinary annuity
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1.8861
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1.8594
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1.7591
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Present value of an annuity due
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1.9615
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1.9524
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1.9174
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Future value of an ordinary annuity
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2.04
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2.05
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2.09
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Future value of an annuity due
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2.1216
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2.1525
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2.2781
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Present value of a single sum
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0.9246
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0.9070
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0.8417
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Future value of a single sum
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1.0816
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1.1025
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1.1881
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