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Non-interest-bearing debt While reading a recent issue of Dental Digest, Dr. Gabi Harris noticed an...

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Accounting

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Non-interest-bearing debt While reading a recent issue of Dental Digest, Dr. Gabi Harris noticed an ad for a new pano she had been interested in purchasing. The ad offered the pano under the following terms: Pano-tastic Imaging Model - BGSE $375,000 zero interest loan Quarterly payments of $18,000 for 5 years The ad captured Dr. Harris' attention, in part, because she recently researched pano machines and the pricing seemed a bit out of line with the market, however the interest rates being charged currently for asset purchases seemed excessive. She likes the idea of purchasing the machine without incurring interest You are asked to advise Dr. Harris on her purchase of the Pano-tastic Imaging machine described in the ad Required: 1. Are there really zero interest loans? Explain? 2. Assume the market rate of interest at the time for this type of transaction is 10%. At what amount should he record the asset purchased? At what amount should he record the liability used to purchase it

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