Solution 1:
Annual equal payment of note = $4,800,000 / Cumulative PV Factor at 12% for 4 periods
= $4,800,000 / 3.03735 = $1,580,325
Journal Entries - American food service | |||
Date | Particulars | Debit | Credit |
1-Jan-18 | Equipment Dr | $4,800,000.00 | |
To Notes Payable | $4,800,000.00 | ||
(To record equipment purchased by issue of note) |
Solution 2:
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-18 | $4,800,000 | $1,580,325 | $576,000 | $1,004,325 | $3,795,675 |
31-Dec-19 | $3,795,675 | $1,580,325 | $455,481 | $1,124,844 | $2,670,831 |
31-Dec-20 | $2,670,831 | $1,580,325 | $320,500 | $1,259,825 | $1,411,006 |
31-Dec-21 | $1,411,006 | $1,580,325 | $169,319 | $1,411,006 | $0 |
Solution 3:
Journal Entries - American food service | |||
Date | Particulars | Debit | Credit |
31-Dec-18 | Interest expense Dr | $576,000.00 | |
Notes payable Dr | $1,004,325.00 | ||
To Cash | $1,580,325.00 | ||
(To record installment payment) |
Solution 4:
Journal Entries - American food service | |||
Date | Particulars | Debit | Credit |
31-Dec-20 | Interest expense Dr | $320,500.00 | |
Notes payable Dr | $1,259,825.00 | ||
To Cash | $1,580,325.00 | ||
(To record installment payment) |
American Food Services, Inc., acquired a packaging machine from Barton and Barton Corporation. Barton and Barton...
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