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On January 1, 2021, Charlottetown Manufacturing Inc. sold an old machine used in one of...

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Accounting

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On January 1, 2021, Charlottetown Manufacturing Inc. sold an old machine used in one of its factories to Truro Corporation in exchange for a non-interest bearing note due January 1, 2023. The agreement of sale between Charlottetown and Truro made no mention of interest. Charlottetown has a December 31 year end. Other information pertaining to this transaction follows: Face value of the non-interest bearing note Original cost of machine to Charlottetown Manufacturing Book value of machine to Charlottetown Manufacturing Truro Corporation has a credit rating that requires it to pay the following rate on borrowed funds: $ 316,000 $ 675,720 $ 250,016 7% Required: 1. Calculate the present value of the note on January 1, 2021. (2 marks) 2. Prepare the journal entry for Charlottetown on the date of sale of the machine. (2 marks) 3. Prepare the journal entries for Charlottetown for the recognition of interest on the note on December 31 of each year. (3.5 marks) 4. Prepare the journal entry for Charlottetown for the collection of the note at maturity. (0.5 marks)

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