Solution 1:
Journal Entries - American food service | |||
Date | Particulars | Debit | Credit |
1-Jan-21 | Equipment Dr | $5,500,000.00 | |
To Notes Payable | $5,500,000.00 | ||
(To record equipment purchased by issue of note) |
Solution 2:
Annual payment on note = $5,500,000 / Cumulative PV factor at 12% for 4 periods
= $5,500,000 / 3.03735 = $1,810,789
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 | $5,500,000 | $1,810,789 | $660,000 | $1,150,789 | $4,349,211 |
31-Dec-22 | $4,349,211 | $1,810,789 | $521,905 | $1,288,884 | $3,060,327 |
31-Dec-23 | $3,060,327 | $1,810,789 | $367,239 | $1,443,550 | $1,616,778 |
31-Dec-24 | $1,616,778 | $1,810,789 | $194,011 | $1,616,778 | $0 |
$7,243,156 | $1,743,156 | $5,500,000 |
Solution 3:
Journal Entries - American food service | |||
Date | Particulars | Debit | Credit |
31-Dec-21 | Interest expense Dr | $660,000.00 | |
Notes payable Dr | $1,150,789.00 | ||
To Cash | $1,810,789.00 | ||
(To record installment payment) |
Solution 4:
Journal Entries - American food service | |||
Date | Particulars | Debit | Credit |
31-Dec-23 | Interest expense Dr | $367,239.00 | |
Notes payable Dr | $1,443,550.00 | ||
To Cash | $1,810,789.00 | ||
(To record installment payment) |
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