Please advise on the red boxes Exercise 1416 Your answer is

Please advise on the red boxes.

Exercise 14-16 Your answer is partially correct. Try again. On January 1, 2017, Culver Company makes the two following acquisitions. 1. Purchases land having a fair value of $330,000 by issuing a 4-year, zero-interest-bearing promissory note in the face amount of $483,153. 2. Purchases equipment by issuing a 696, 9-year promissory note having a maturity value of $380,000 (interest payable annually on January 1). The company has to pay 10% interest for funds from its bank. (a) Record the two journal entries that should be recorded by Culver Company for the two purchases on January 1 2017 (b) Record the interest at the end of the first year on both notes using the effective-interest method (Round present value factor calculations to 5 decimal places, e.g. 1.25 124 and the final answer to 0 decimal places eg. 58,971·\"no entry s equired, select \"\"No Entry\" for the account titles and enter 0 for the amounts. Credit account titles are automatically indented when amount is entered. Do not indent manually.)

Solution

Computation of the discount on notes payable Maturity value 380,000 PV of $380,000 due in 9 years at 10% - 380,000*.42410 161158 PV of $22,800 payable annually at for 9years at 10% annuity 131306 (22800*5.75902) present value of the note 292464 Discount 87,536 Journal entries no Accounting titles & Explanations Debit Credit 1) Land 330,000 Discount on notes payable 153,153 Notes payable 483,153 2) Equipment 292,464 Discount on notes payable 87,536 Notes payable 380,000 3) interest expense 33,000 discount on notes payable 33,000 (330,000*10%) 4) interest expense (292464*10%) 29246 Discount on notes payable 6446 interest payable (380,000*6%) 22800