Question

Teal Corporation purchased a computer on December 31, 2019, for $132,300, paying $37,800 down and agreeing to pay the balance in five equal installments of $18,900 payable each December 31 beginning in 2020. An assumed interest rate of 9% is implicit in the purchase price.New attempt is in progress. Some of the new entries may impact the last attempt grading.Your answer is partially correct.

Prepare the journal entry at the date of purchase. (Round factor values to 5 decimal places, e.g. 1.25124 and final answers to 2 decimal places, e.g. 52.75. Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.)

Date	Account Titles and Explanation	Debit	Credit
December 31, 2019

Prepare the journal entry at December 31, 2020, to record the payment and interest (effective-interest method employed). (Round answers to 2 decimal places, e.g. 52.75. Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.)

Date	Account Titles and Explanation	Debit	Credit
December 31, 2020

Prepare the journal entry at December 31, 2021, to record the payment and interest (effective-interest method employed). (Round answers to 2 decimal places, e.g. 52.75. Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.)

Date	Account Titles and Explanation	Debit	Credit
December 31, 2021

Answer 1

Annual payment = (Principal * Rate of interest * (1+Rate on interest)^12)/((1+Rate on interest)^12)-1)
= ((1,32,300 - 37,800- Interest) * .09 * 1.09^5)/(1.09^5 - 1)
= ((94500 - Interest) * .09 * 1.538624) / (1.538624 - 1)
= ((94500 - Interest) *.138476) / 0.538624
18,900        = ((94500 - Interest) *.138476) / 0.538624
73,514.5       = (94500 - Interest)
Interest       = (94500 - 73,514.5) =		20985.5
Principal       = 73,514.5
Payment Date	Lease Payment	Effective Interest	Decrease in Balance	Lease Balance
Purchase	37,800.00			73,514.50
31-12-2020	18,900.00	6,616.31	12,283.70	61,230.81
31-12-2021	18,900.00	5,510.77	13,389.23	47,841.58
31-12-2022	18,900.00	4,305.74	14,594.26	33,247.32
31-12-2023	18,900.00	2,992.26	15,907.74	17,339.58
31-12-2024	18,900.00	1,560.42	17,339.58	0.00

Date	Journal Entry	Debit	Credit
01-01-2021	Gross Asset (Computer)	1,11,314.50
	Lease Liability		73,514.50
	Cash		37,800.00
31-12-2020	Lease Rental Expense (Reduction of Lease Liability)	12,283.70
	Interest Expense	6,616.30
	Cash (Paid to Lessor)		18,900.00
31-12-2021	Lease Rental Expense (Reduction of Lease Liability)	13,389.23
	Interest Expense	5,510.77
	Cash (Paid to Lessor)		18,900.00