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Intermediate Accounting: Reporting...

3rd Edition
James M. Wahlen + 2 others
ISBN: 9781337788281

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BuyFindarrow_forward

Intermediate Accounting: Reporting...

3rd Edition
James M. Wahlen + 2 others
ISBN: 9781337788281
Textbook Problem
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On January 1, 2019, Billips Corporation purchased equipment having a fair value of $72,054.94 by issuing a $90,000 note, payable in three $30,000 annual installments beginning December 31, 2019.

Required:

Prepare (1) the journal entry to record the purchase of the equipment, (2) a schedule to compute the annual interest expense, and (3) the journal entries to record yearly interest expense and note repayments over the life of the note.

1.

To determine

Prepare journal entry to record purchase of the equipment.

Explanation

Installment note:

Installment note is an obligation in which the defaulter needs to repay the investor total amount includes principal and interest on certain terms and conditions in a series of periodic payments.

Prepare journal entry to record purchase of the equipment.

DateAccount titles and ExplanationDebitCredit
January 1, 2019Equipment$72,054.94  
 Discount on notes payable  (balancing figure)$17,945...

2.

To determine

Prepare a schedule to calculate annual interest expense of Corporation B.

3.

To determine

Prepare journal entry to record yearly interest expense and repayment of notes over the life of the note.

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