Question

On the 1st March 2019, Concept Limited purchased printing equipment costing $186,000 by issuing a 5 year, 4% unsecured note payable. The note requires $42,000 annual principal repayments plus interest each 1st March. Journalise the transactions to account for the acquisition of equipment. (Remember to allocate the current and non-current portions of the liability) Accrue interest on the note payable at the 31st December, 2019. Record the payment of the first instalment (including interest) of the note payable on 1st March, 2020 and then accrue interest as at 31st December, 2020. Prepare an excerpt from the Balance Sheet as at 31st December, 2020 showing liabilities.

Answer 1

Date	Accounts and explanation	Debit($)	Credit($)
March 1 , 2019	Equipment	186000
	To Unsecured Note payable		186000
	( To record Equipment purchased by issuing note)
Dec 31 , 2019	Interest expense	6200
	To Interest payable		6200
	( To record Accrued interest)
	(186000*4%*10/12)
march 1 , 2020	Interest Expense (186000*4%*2/12)	1240
	Interest payable	6200
	Unsecured note payable	42000
	To Cash		49440
	( To record first installment )
Dec 31 , 2020	Interest expense	4800
	To Interest payable		4800
	( To record Accrued interest)
	(186000-42000)*4%*10/12