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    Dec 5, 2012, 11:02 PM
    Problem 1 - Accounting for Notes Receivable: On December 31, 2009 Berry Corporation
    Problem 1 - Accounting for Notes Receivable:

    On December 31, 2009 Berry Corporation sold some of its product to Flynn Company, accepting a 3%, four-year promissory note having a maturity value of $900,000 (interest payable annually on December 31). Berry Corporation pays 6% for its borrowed funds. Flynn Company, however, pays 8% for its borrowed funds. The product sold is carried on the books of Berry at a manufactured cost of $570,000. Assume Berry uses a perpetual inventory system.

    Instructions
    (a) Prepare the journal entries to record the transaction on the books of Berry Corporation at December 31, 2009. (Assume that the effective interest method is used. Use the interest tables below and round to the nearest dollar.)
    (b) Make all appropriate entries for 2010 on the books of Berry Corporation.
    (c) Make all appropriate entries for 2011 on the books of Berry Corporation.


    Use the following interest factor tables for Problem1:

    Table 1
    Future Value of 1

    Periods 2% 3% 4% 6% 8%
    1 1.02000 1.03000 1.04000 1.06000 1.08000
    2 1.04040 1.06090 1.08160 1.12360 1.16640
    3 1.06121 1.09273 1.12486 1.19102 1.25971
    4 1.08243 1.12551 1.16986 1.26248 1.36049
    5 1.10408 1.15927 1.21665 1.33823 1.46933


    Table 2
    Present Value of 1

    Periods 2% 3% 4% 6% 8%
    1 0.98039 0.97087 0.96154 0.94340 0.92593
    2 0.96117 0.94260 0.92456 0.89000 0.85734
    3 0.94232 0.91514 0.88900 0.83962 0.79383
    4 0.92385 0.88849 0.85480 0.79209 0.73503
    5 0.90573 0.86261 0.82193 0.74726 0.68058








    Table 3
    Future Value of Ordinary Annuity of 1

    Periodic Rents 2% 3% 4% 6% 8%
    1 1.00000 1.00000 1.00000 1.00000 1.00000
    2 2.02000 2.03000 2.04000 2.06000 2.08000
    3 3.06040 3.09090 3.12160 3.18360 3.24640
    4 4.12161 4.18363 4.24646 4.37462 4.50611
    5 5.20404 5.30914 5.41632 5.63709 5.86660

    Table 4
    Present Value of Ordinary Annuity of 1

    Periodic Rents 2% 3% 4% 6% 8%
    1 0.98039 0.97087 0.96154 0.94340 0.92593
    2 1.94156 1.91347 1.88609 1.83339 1.78326
    3 2.88388 2.82861 2.77509 2.67301 2.57710
    4 3.80773 3.71710 3.62990 3.46511 3.31213
    5 4.71346 4.57971 4.45182 4.21236 3.99271

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