On March 1, fixtures and equipment were purchased for $5,500 with a downpayment

Question

On March 1, fixtures and equipment were purchased for $5,500 with a downpayment of $1,500 plus a $4,000 note payable in one year. Interest of 6.5% per year is due when the note is repaid. The estimated life of the fixtures and equipment is 9 years with no expected salvage value. Depreciation on the fixtures and equipment is computed on a straight-line basis. [Note: Record the March 1 equipment purchase first, then the March 31 depreciation adjusting entry, and finally the March 31 interest adjusting entry. Also, round all answers to the nearest cent.

Account options:

Cash, Accounts Receivable, Inventory, Prepaid Rent, Fixtures and equipment, Accounts Payable, Interest payable, Wages payable, Notes payable, Paid-in capital, Retained earnings.

Explanation / Answer

March 1 Fixture And Equipment 5,500

Note payable 4,000

Cash 1,500

(Being fixture & Equipement Purchased

March 31 Deprication 51

Fixutre & Equipment 51

(Being Depreciation charges for a period of 1 month)

Mar 31 Interest Payable 22

Note Payable 22

(Being amount due for Interest on Note payable after one month )

Feb 28 Interest Payable 238

Note Payable 238

(Being amount due for Interest on Note payable for remaining period i.e. 11 months )

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