II. Notes Payable. Rubio Company had the following borrowingactivity. Rubio has a borrowing rate of 6 percent on its otherdebt.
A. On June 30, 2016, Rubio issued a non-interest bearing, 10year note of $50,000 to acquire land for expansion.
1. Calculate the cash equivalent price of the land (assuming 6%is the market rate).
2. Prepare the journal entry to record the acquisition on June30.
B. On January 1, 2016, Rubio acquired equipment by issuing an$80,000, 2 percent (low-interest bearing), 5 year note, withinterest paid annually, starting December 31, 2016.
1. Calculate the cash equivalent price of the equipment(assuming 6% is the market rate).
2. Prepare the journal entry to record the acquisition onJanuary 1.
3. Prepare the journal entry to record the interest payment onDecember 31, 2016, assuming the effective interest method.
