Frevert purchased a new piece of equipment to be used in its new facility. The $

Question

Frevert purchased a new piece of equipment to be used in its new facility. The $439,000 piece of equipment was purchased with a $45,000 down payment and with cash received through the issuance of a $394,000, 8%, 7-year mortgage note payable issued on October 1, 2014. The terms provide for quarterly installment payments of $18,514 on December 31, March 31, June 30, and September 30.

A.) Prepare an installment payments schedule for the first five payments of the notes payable.

B.)Prepare the journal entry related to the notes payable for December 31, 2014.

C.) Show the balance sheet presentation for this obligation for December 31, 2014. (Hint: Be sure to distinguish between the current and long-term portions of the note.)

Explanation / Answer

2-   CASH DEBIT               18514

        INTEREST EXPENSE DEBIT              7880

        NOTES PAYABLE DEBIT                  10634

        CREDIT CASH           18514

BALANCE ANSWER NO 1 14-Oct PAYMENT INTEREST PRINCIPAL REDUCED 394000 DEC 18514 7880 10634 383366 MAR   18514 7667.32 10846.68 372519.3 JUNE 18514 7450.386 11063.61 361455.7 SEP 18514 7229.114 11284.89 350170.8 DECEMBER 18514 7003.416 11510.58 338660.2 ANSWER NO 3 BALANCE SHEET CURRENT LIABILITY 7880 NOTES PAYABLE 7880 LONG TERM LIABILITY NOTES PAYABLE 383366 TOTAL 391246

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