Question

Problem 10-3A On September 30, 2017, Coldwater Corporation purchased equipment for $940,000. The equipment was purchased with a $100,000 down payment and a three-year, 5%, $840,000 bank loan for the balance. The terms provide for payment of the bank loan with quarterly fixed principal payments of $70,000, plus interest, starting on December 31. Coldwater has a November 30 year end and records adjusting entries annually. Record the purchase of equipment on September 30, 2017. (Round answers to the nearest whole dollar, e.g. 5,275. Credit account titles are automatically indented when the amount is entered. Do not indent manually.) Debit Credit Date Account Titles and Explanation Sept. 30

Answer 1

Date	Accoun titles and explanation	Debit	Credit
30-Sep	Equipment	$940,000
	Cash		$100,000
	Bank loan		$840,000
	(equipment purchased)
2017
30-Nov	Interest expense	$7,000		(840,000*5%*2/12)
	Interest payable		$7,000
	(interest accrued booked)
31-Dec	Bank loan	$70,000
	Interest payable	$7,000
	Interest expense	$3,500		(840000*5%*1/12)
	Cash		$80,500
	(interest payment and principal payment recorded)
2018
31-Mar	Bank loan	$70,000
	Interest expense	$9,625		(840000-70000)*5%*3/12
	Cash		$79,625
	(Interest booked and principal paid)
2017
30-Nov	Interest expense	$7,000
	Interest payable		$7,000
	(interest accrued booked)
31-Dec	Bank loan	$65,317
	Interest payable	$7,000
	Interest expense	$3,500
	Cash		$75,817
	(interest payment and principal payment recorded)
2018
31-Mar	Bank loan	$66,133		(840,000-65,317)*5%*3/12
	Interest expense	$9,684
	Cash		$75,817
	(Interest booked and principal paid)

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