Question

Frasquita acquired equipment from the manufacturer on 6/30/2018 and gave a noninterest-bearing note in exchange. frasquita is obligated to pay $550,000 on 4/30/2019 to satisfy the obligation in full.if frasquita accrued interest of $15,000 on the note in its 2018 year-end financial statements, what amount would it record the equipment on its 6/30/2018 balance sheet?

Answer 1

Since this is a noninterest-bearing note, or a zero-interest-bearing note payable, what's entered into the 6/30/2018 balance sheet is the Future Value of the equipment. The future value, or the face value, is the amount that Frasquita is obligated to pay on 4/30/2019.

This means that $550000 is the amount recorded as a Notes Payable in the 6/30/2018 balance sheet.