Notes Payable (Zero Interest Bearing Note Exchanged For Equipment, Capitalization Equals PV)

Описание: Accounting for zero interest bearing note exchanged for equipment (computer system), the equipment capitalized amount (present value of note) equals the notes maturity value discounted back to its issue date using the debtors effective interest rate (credit rating intetrest rate), the discount (notes face value - notes present value) is amortized using the debtors effective interest rate which is the interest expense realized on this note, example On 12/31/20X1 Corp-A acquires a computer system from Corp-B by issuing a $800,000 zero interest bearing note payable in full on 12/31/20X5 (due in 4-yrs), Corp-A credit rating allows them to borrow at 10% IR, the computer system has a salvage value of $70,000 with 5 year life, the equipment is depreciated using the (capitalized amount less salvage value/useful life), detailed accounting by Allen Mursau