Sabonis Cosmetics Co. purchased machinery on December 31, 2013, paying $51,900 d
ID: 2416861 • Letter: S
Question
Sabonis Cosmetics Co. purchased machinery on December 31, 2013, paying $51,900 down and agreeing to pay the balance in four equal installments of $40,600 payable each December 31. An assumed interest of 8% 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. 38,538. 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.)
No.
Account Titles and Explanation
Debit
Credit
(a) December 31, 2013. (b) December 31, 2014. (c) December 31, 2015. (d) December 31, 2016. (e) December 31, 2017.Explanation / Answer
CAPITALIZED VALUE OF MACHINERY=> PV of $40600 annuity @ 8% for 4 years ($40600 X 3.31213)
=> 134473 + 51900 => $186373
Interests
JOURNAL ENTRIES
31/12/2013
Machinery A/c $186373
Discount on notes payabel A/c dr. $27927
To Cash A/c cr. $51900
To Notes Payable A/c cr. $162400
b(1)
Notes Payable A/c Dr. $40600
To Cash A/c cr. $40600
b(2)
Interests Expenxe A/c dr. $10758
To Discount on Notes Payable A/c cr. $10758
c(1)
Notes Payable A/c Dr. $40600
To Cash A/c cr. $40600
c(2)
Interests Expenxe A/c dr. $8370
To Discount on Notes Payable A/c cr. $8370
d(1)
Notes Payable A/c Dr. $40600
To Cash A/c cr. $40600
d(2)
Interests Expenxe A/c dr. $5792
To Discount on Notes Payable A/c cr. $5792
e(1)
Notes Payable A/c Dr. $40600
To Cash A/c cr. $40600
e(2)
Interests Expenxe A/c dr. $3007
To Discount on Notes Payable A/c cr. $3007
DATE CASH PAID INTEREST EXPENSE AMMORTIZATION CARRYING AMOUNT OF NOTE 31/12/2013 134473 31/12/2014 40600 10758 29842 104631 31/12/2015 40600 8370 32230 72401 31/12/2016 40600 5792 34808 37593 31/12/2017 40600 3007 37593 -Related Questions
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