Make the journal entry to record the purchase of machine

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Reference no: EM133010321

At the beginning of 2021, VHF Industries acquired a machine with a fair value of $7,209,560 by issuing a five-year, noninterest-bearing note in the face amount of $10 million. The note is payable in five annual installments of $2 million at the end of each year. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) (Use appropriate factor(s) from the tables provided.)

Required:

Problem 1. What is the effective rate of interest implicit in the agreement?

Problem 2. Prepare the necessary journal entries.
January 1,2021
December 31, 2021
December 31, 2022

Problem 3. Suppose the market value of the machine was unknown at the time of purchase, but the market rate of interest for notes of similar risk was 11%. Prepare the journal entry to record the purchase of the machine.

Reference no: EM133010321

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