Web Camei http://ezto connect ACCOUNTIN Quiz Chapter 14 Question 12 (of 12) LCD
ID: 2490646 • Letter: W
Question
Web Camei http://ezto connect ACCOUNTIN Quiz Chapter 14 Question 12 (of 12) LCD Industries purchased a supply of electronic components from Entel Corporation on November 1, 201 In payment for the $40 million purchase, LCD issued a 1-year installment note to be paid in equal month payments at the end of each month The payments include interest at the rate of 12% (FV of $1. PV of $ FVA of $1. PVA of $1 FVAD of $1 and PVAD of $1) (Use appropriate factor(s) from the tabl provided.) Required: 1. Prepare the journal entry for LCD's purchase of the components on November 1, 2013 (Enter yo answers in whole dollars. If no entry is required for a transaction, select required" in the first account field.) hole dollars. If no entry is required for a transaction, select "No journal ent view transaction list view general journal Date nov. 1,2013 Component inventory General Journal Debit Credit 40,000,000 Notes payable 40.000,000Explanation / Answer
Nov.1,2013 Component inventory 40,000,000
Notes payable 40,000,000
Nov.30,2013 Interest Expense 400000
Notes payable 3509346
Cash 3909346
Interest expense (1% × outstanding balance) = $400,000
Calculation of installment payment:
$44,000,000 (amount of loan ) ÷ 11.25508 ((from PVA of $1) n = 12, i = 1%) = $3909346 ( installment payment)
November (1% × $44,000,000 ) $ 400,000
December (1% × [$44,000,000 – 3509346]) 404907
2013 interest expense $ 804907
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