Question

Cheyenne Corporation purchased a computer on December 31, 2019, for $140,700, paying $40,200 down and agreeing to pay the balance in five equal installments of $20,100 payable each December 31 beginning in 2020. An assumed interest rate of 9% is implicit in the purchase price. (a) Prepare the journal entry at the date of purchase. (Round factor values to 5 decimal places, e.g. 1.25124 and final answers to 2 decimal places, e.g. 52.75. Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter O for the amounts.) Date Account Titles and Explanation Debit Credit December 31, 2019

Answer 1

Down Payment= $40,200 Annual Payment= $20,100 Number of Payments 5 AnnualInterest Rate 9% Face Value of Notes Payable Numberof Payments * Annual Payment Face Value of Notes Payable 5* $20,100 Face Value of Notes Payable $100,500 Present Value of Annual Payments $20,100 PVA of $1 (9%,5) Present Value of Annual Payments $20,100 * 3.88965 Present Value of Annual Payments $78,182 Account Titles and Explanation Credit Debit Date Equipment ($78,182 + $40,200) Dec. 31, 2019 118,382 Discount on Notes Payable 22,318 Notes Payable 100,500 Cash 40,200