Solution 1:
Journal Entries - American food service | |||
Date | Particulars | Debit | Credit |
1-Jan-21 | Equipment Dr | $4,200,000.00 | |
To Notes Payable | $4,200,000.00 | ||
(To record equipment purchased by issue of note) |
Solution 2:
Annual installment amount = $4,200,000 / Cumulative PV factor at 12% for 4 periods
= $4,200,000 / 3.03735 = $1,382,784
Amortization of Installment Note | |||||
Year Ending Dec 31 | Jan 1, Carrying Amount | Note Payment (Cash Paid) | Interest expense (12% of Jan 1 carrying amount) | Decrease in note payable | Dec 31, carrying amount |
31-Dec-21 | $4,200,000 | $1,382,784 | $504,000 | $878,784 | $3,321,216 |
31-Dec-22 | $3,321,216 | $1,382,784 | $398,546 | $984,238 | $2,336,978 |
31-Dec-23 | $2,336,978 | $1,382,784 | $280,437 | $1,102,347 | $1,234,631 |
31-Dec-24 | $1,234,631 | $1,382,784 | $148,153 | $1,234,631 | $0 |
solution 3:
Journal Entries - American food service | |||
Date | Particulars | Debit | Credit |
31-Dec-21 | Interest expense Dr | $504,000.00 | |
Notes payable Dr | $878,784.00 | ||
To Cash | $1,382,784.00 | ||
(To record installment payment) |
Solution 4:
Journal Entries - American food service | |||
Date | Particulars | Debit | Credit |
31-Dec-23 | Interest expense Dr | $280,437.00 | |
Notes payable Dr | $1,102,347.00 | ||
To Cash | $1,382,784.00 | ||
(To record installment payment) |
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