Step 3: Enter your full question details hereOn January 1 Wild Flowers purchased

Question

Step 3: Enter your full question details hereOn January 1 Wild Flowers purchased a new lawn tractor costing $2,400 by making a $400 down payment and signing a two year note payable for $2,000 for the remainder. The interest rate on the note is 10% annually, with all interest payable at the maturity date of the note. The tractor is expected to last 4 years, and the company uses the straight-line method for depreciation.

Which one of the following statements is correct (true) with respect to any AJE's needed at December 31 (of the first year) for the tractor or note?

A) Interest Expense will be recorded for $240
B) Note Payable will be credited
C) Equipment Expense will be debited
D) Accumulated Depreciation will be credited $600

Explanation / Answer

D .is correct or true because annual depreciation = 2400 / 4 which is $ 600. A . Is false because Interest Expense is 2000 * 0.1 which is $200. B .Is False because Note Payable is credited on January 1st itself . C. Is False because Depreciation expense and not Equipment Expense will be debited on 31st Dec.

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