Blossom Cosmetics Co. purchased machinery on December 31, 2016, paying $48,000 down and agreeing to pay...

Blossom Cosmetics Co. purchased machinery on December 31, 2016, paying $48,000 down and agreeing to pay the balance in four equal installments of $47,200 payable each December 31. An assumed interest of 9% is implicit in the purchase price.

Prepare the journal entries that would be recorded for the purchase and for (1) the payments and (2) interest on the following dates. (Round answers to 0 decimal places, e.g. 38,548. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts. Credit account titles are automatically indented when amount is entered. Do not indent manually.)

(a)		December 31, 2016.
(b)		December 31, 2017.
(c)		December 31, 2018.
(d)		December 31, 2019.
(e)		December 31, 2020.

Expert Solution

Amount financed:
Annual instalment				47200
Annuity factor for 4 years at 9%				3.2397
Amount financed:				152914

Amort chart
Date	Amt paid	Interest	Principle	Book Value
31.12.16				152914
31.12.17	47200	13762.26	33437.74	119476.3
31.12.18	47200	10752.86	36447.14	83029.12
31.12.19	47200	7472.621	39727.38	43301.74
31.12.20	47200	3898.255	43301.74	0

Journal entries
Date	Accounts title and explanations				Debit $	Credit $
31.12.16	Equipment Account Dr.				200914
	Cash account					48000
	Instalment note payable					152914

31.12.17	Instalment notes payable Dr.				33437.74
	Interest expense Account Dr.				13762.26
	Cash account					47200

31.12.18	Instalment notes payable Dr.				36447.14
	Interest expense Account Dr.				10752.86
	Cash account					47200

31.12.19	Instalment notes payable Dr.				39727.38
	Interest expense Account Dr.				7472.62
	Cash account					47200

31.12.20	Instalment notes payable Dr.				43301.74
	Interest expense Account Dr.				3898.26
	Cash account					47200

ekkarill92 answered 1 year ago

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