Splish Cosmetics Co. purchased machinery on December 31, 2016, paying $48,000 do

Question

Splish Cosmetics Co. purchased machinery on December 31, 2016, paying $48,000 down and agreeing to pay the balance in four equal installments of $47,200 payable each December 31. An assumed interest of 9% 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

(a) December 31, 2016. (b) December 31, 2017. (c) December 31, 2018. (d) December 31, 2019. (e) December 31, 2020.

Explanation / Answer

Journal:

Present value calculation 2016 2017 2018 2019 2020 Payment 48000 47200 47200 47200 47200 Discount factor@ 9% 1 0.9174312 0.84168 0.7721835 0.70842521 Present value 48000 43302.752 39727.296 36447.06 33437.67 Machine cost          200,915 Down payament 48000 Note payable          152,915

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