Sheffield Corporation purchased a computer on December 31, 2016, for $134,400, p
ID: 2562846 • Letter: S
Question
Sheffield Corporation purchased a computer on December 31, 2016, for $134,400, paying $38,400 down and agreeing to pay the balance in five equal installments of $19,200 payable each December 31 beginning in 2017. An assumed interest rate of 8% is implicit in the purchase price.
Prepare the journal entry at December 31, 2017, to record the payment and interest (effective-interest method employed). (Round answers to 0 decimal places, e.g. 5,275. 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 0 for the amounts.)
Explanation / Answer
Date
Accounts title and Explanation
Debit
Credit
December 31, 2017
Notes Payable
11520
Interest Expense
7680
Cash
19200
Being payment of 1st Instalment
Particulars
Opening Balance
Installment Amount
Principal Component
Interest
Closing Balance
December 31, 2016
134400
38400
38400
0
96000
[134400 - 38400]
December 31, 2017
96000
19200
11520
[19200 - 7680]
7680
[96000*8%]
84480
[96000 - 11520]
Date
Accounts title and Explanation
Debit
Credit
December 31, 2017
Notes Payable
11520
Interest Expense
7680
Cash
19200
Being payment of 1st Instalment
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