On January 1, year 1, Ontario Company sold a new machine to Canada Company for $70,000. Canada Company made a cash down payment of $20,000 and signed a $50,000, S percent note for the balance due. The note is payable in three equal instalments due on December 31, year 1. year 2, and year 3. Each payment includes principal plus interest on the unpaid balance. Canada Company recorded the purchase as follows: Date January 1, year 1 December 31, year I January 1, year 1 Machinery Cash Note payable Required (show computations and round to the nearest dollar): 1. What is the amount of the equal annual payments that Canada Company must make? 2. What is the total interest on the note over the three years? 3. Complete the following debt payment schedule: December 31, year 2 December 31, year 3 Total 70,000 20,000 50,000 4. Prepare the journal entries for each of the three payments. 5. Explain why interest expense decreased in amount each year. Debt Payment Schedule Cash Payment Interest Expense Decrease in Principal Unpaid Principal

On January 1, year 1, Ontario Company sold a new machine to Canada Company for $70,000. Canada Company made a cash down payment of $20,000 and signed a $50,000, S percent note for the balance due. The note is payable in three equal instalments due on December 31, year 1. year 2, and year 3. Each payment includes principal plus interest on the unpaid balance. Canada Company recorded the purchase as follows: Date January 1, year 1 December 31, year I January 1, year 1 Machinery Cash Note payable Required (show computations and round to the nearest dollar): 1. What is the amount of the equal annual payments that Canada Company must make? 2. What is the total interest on the note over the three years? 3. Complete the following debt payment schedule: December 31, year 2 December 31, year 3 Total 70,000 20,000 50,000 4. Prepare the journal entries for each of the three payments. 5. Explain why interest expense decreased in amount each year. Debt Payment Schedule Cash Payment Interest Expense Decrease in Principal Unpaid Principal

Principles of Accounting Volume 1

19th Edition

ISBN:9781947172685

Author:OpenStax

Publisher:OpenStax

Chapter11: Long-term Assets

Section: Chapter Questions

Problem 5EB: Steele Corp. purchases equipment for $30,000. Regarding the purchase, Steele paid shipping of...

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