Solution 1:
Journal Entries - American food service | |||
Date | Particulars | Debit | Credit |
1-Jan-21 | Equipment Dr | $5,000,000.00 | |
To Notes Payable | $5,000,000.00 | ||
(To record equipment purchased by issue of note) |
Solution 2:
Annual installment = $5,000,000 / Cumulative PV factor at 8% for 4 periods
= $5,000,000 / 3.31213 = $1,509,603
Amortization of Installment Note | |||||
Year Ending Dec 31 | Jan 1, Carrying Amount | Note Payment (Cash Paid) | Interest expense (8% of Jan 1 carrying amount) | Decrease in note payable | Dec 31, carrying amount |
31-Dec-21 | $5,000,000 | $1,509,603 | $400,000 | $1,109,603 | $3,890,397 |
31-Dec-22 | $3,890,397 | $1,509,603 | $311,232 | $1,198,371 | $2,692,026 |
31-Dec-23 | $2,692,026 | $1,509,603 | $215,362 | $1,294,241 | $1,397,785 |
31-Dec-24 | $1,397,785 | $1,509,603 | $111,818 | $1,397,785 | $0 |
Solution 3:
Journal Entries - American food service | |||
Date | Particulars | Debit | Credit |
31-Dec-21 | Interest expense Dr | $400,000.00 | |
Notes payable Dr | $1,109,603.00 | ||
To Cash | $1,509,603.00 | ||
(To record installment payment) |
Solution 4:
Journal Entries - American food service | |||
Date | Particulars | Debit | Credit |
31-Dec-23 | Interest expense Dr | $215,362.00 | |
Notes payable Dr | $1,294,241.00 | ||
To Cash | $1,509,603.00 | ||
(To record installment payment) |
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