Blue Cosmetics Co. purchased machinery on December 31, 2016, paying $47,300 down
ID: 2335499 • Letter: B
Question
Blue Cosmetics Co. purchased machinery on December 31, 2016, paying $47,300 down and agreeing to pay the balance in four equal installments of $46,400 payable each December 31. An assumed interest of 8% is implicit in the purchase price.
Prepare the journal entries that would be recorded for the purchase and for (1) the payments and (2) interest on the following dates. (Round answers to 0 decimal places, e.g. 38,548. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts. Credit account titles are automatically indented when amount is entered. Do not indent manually.)
No.
Account Titles and Explanation
Debit
Credit
Open Show Work
(a) December 31, 2016. (b) December 31, 2017. (c) December 31, 2018. (d) December 31, 2019. (e) December 31, 2020.Explanation / Answer
No.
Account Titles and Explanation
Debit
Credit
(a)
Machinery
200981*
Discount on Notes Payable
31919
Cash
47300
Notes Payable
185600
(b) (1)
Notes Payable
46400
Cash
46400
(b) (2)
Interest Exp
12294.48
Discount on Notes Payable
12294.48
(c) (1)
Notes Payable
46400
Cash
46400
(c) (2)
Interest Exp
9566.04
Discount on Notes Payable
9566.04
(d) (1)
Notes Payable
46400
Cash
46400
(d) (2)
Interest Exp
6619.32
Discount on Notes Payable
6619.32
(e) (1)
Notes Payable
46400
Cash
46400
(e) (2)
Interest Exp
3439.16
Discount on Notes Payable
3439.16
*(46400 * PVAF @8%) + 47300
= (46400 * 3.3121) + 47300 = 200981
**
Date
Cash Paid
Interest Exp
Ammortisation
Carrying Amt of Note
Dec 31, 2016
153681
Dec 31, 2017
46400
12294.48
34105.52
119575.48
Dec 31, 2018
46400
9566.04
36833.96
82741.52
Dec 31, 2019
46400
6619.32
39780.68
42960.84
Dec 31, 2020
46400
3439.16
42960.84
0
No.
Account Titles and Explanation
Debit
Credit
(a)
Machinery
200981*
Discount on Notes Payable
31919
Cash
47300
Notes Payable
185600
(b) (1)
Notes Payable
46400
Cash
46400
(b) (2)
Interest Exp
12294.48
Discount on Notes Payable
12294.48
(c) (1)
Notes Payable
46400
Cash
46400
(c) (2)
Interest Exp
9566.04
Discount on Notes Payable
9566.04
(d) (1)
Notes Payable
46400
Cash
46400
(d) (2)
Interest Exp
6619.32
Discount on Notes Payable
6619.32
(e) (1)
Notes Payable
46400
Cash
46400
(e) (2)
Interest Exp
3439.16
Discount on Notes Payable
3439.16