Splish Corporation purchased a computer on December 31, 2016, for $136,500, payi

Question

Splish Corporation purchased a computer on December 31, 2016, for $136,500, paying $39,000 down and agreeing to pay the balance in five equal installments of $19,500 payable each December 31 beginning in 2017. An assumed interest rate of 9% is implicit in the purchase price.

Date

Account Titles and Explanation

Debit

Credit

Date

Account Titles and Explanation

Debit

Credit

Date

Account Titles and Explanation

Debit

Credit

Splish Corporation purchased a computer on December 31, 2016, for $136,500, paying $39,000 down and agreeing to pay the balance in five equal installments of $19,500 payable each December 31 beginning in 2017. An assumed interest rate of 9% is implicit in the purchase price.

Explanation / Answer

Journal entry ;

Date accounts & explanation debit credit December 31,2016 Equipment 136500 Cash 39000 Notes payable (19500*5) 97500 (To record purchase) December 31,2017 Notes payable a/c 19500 Interest expenses a/c (97500*9%) 8775 Cash a/c 28275 (To record installment paid) December 31,2018 Notes payable 19500 Interest expenses (97500-19500)*9% 7020 Cash a/c 26520 (To record installment paid)

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