Question

e. Assume that a machine was purchased for $53,700. Cash of $24,500 was paid, and a four-year, 8% note payable was signed for the balance. 1. Prepare the horizontal model and record the journal entry, to show the purchase of the machine as described. 2. How much is the equal annual payment of principal and interest due at the end of each year? 3. What is the total amount of interest expense that will be reported over the life of the note? 4. Prepare the horizontal model and record the journal entries, to show the equal annual payments of principal and interest due at the end of each year. Complete this question by entering your answers in the tabs below. Req A Req B. Reg C Reg D Req Ela Req Elb Reg E2 Req E3 Req E4a Req E4b Assume that a machine was purchased for $53,700. Cash of $24,500 was paid, and a four-year, 8% note payable was signed for the balance. Prepare the horizontal mode with + for increases and amounts with – for decreases.) Balance Sheet Income Statement Assets Liabilities + Stockholders' Equity Net Income Revenues - + = +

Answer 1

When a persone want to aquire an asset but it is not sure to make payment within a stipulated period of time he may pay in installments if the vendor agrees. this enables the purchaser to use the asset while paying for it in installment over in agreed period of time.
This type of business deal is known as hire purchase transection.

1. prepration of journal entries in the books of hire purchaser

Jouwmal Enteries Amount (A) Amountar Particular Ist year , D (a) Machinary Alo Ho Histe vendor / Note payable $53700 $53700 (6) Histe vendor/Note payable To Cast / Bank Alo Dr $24500 $24500 (c) When an dustallment becomes due Interest Alexponse All Dr $2336 Yo Note payable All $2332 e) eshou om cirstallmented's pred Hise vendbo/Note payablette To Cast / Bank Alu $9636 $9636


2.CALCULATION OF INTEREST AND INSTALLMENT PAYMENT AT END OF EACH YEAR

Cash price (I) Calculation of interest and Installment Particular Principal Interest@8% dustallment $53700 cox: Dawn payment 694900) 24500 $94500 29200 (7300) Less: Ist pay $7300 2336 $9636 21900 (7300) $ 7300 1752 $9052 14600 (7300) $7300 1168 $8468 7300 584 $7884 4306 $ 7300 Total $53700 $5840 $56540 Less Ind pay less Iled pay dess: Inth pay coooking Calculation of balance amount Machimary purchased - $53700 Down payment $2450 $29200 Balance sumount . # Balance amount & payable with 4 amudel equal Justallment plus interest@ 8% Heuce, $29200/4 cell payment. - $7300 annual


3.ANNUAL PAYMENT OF EQUAL ANNUAL PRINCIPAL AND INTEREST
1ST YEAR = $7300 + $2336 = $9636
2nd YEAR = $7300 + $1752 = $9052
3rd YEAR = $7300 + $1168 = $8468
4rth YEAR = $7300 + $584 = $7884

4. TOTAL INTEREST PAYMENT IS $5840