Blossom Cosmetics Co purchased machinery on December 31 2016

Blossom 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.)

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

Solution

Amount financed: Annual instalment 47200 Annuity factor for 4 years at 9% 3.2397 Amount financed: 152914 Amort chart Date Amt paid Interest Principle Book Value 31.12.16 152914 31.12.17 47200 13762.26 33437.74 119476.3 31.12.18 47200 10752.86 36447.14 83029.12 31.12.19 47200 7472.621 39727.38 43301.74 31.12.20 47200 3898.255 43301.74 0 Journal entries Date Accounts title and explanations Debit $ Credit $ 31.12.16 Equipment Account Dr. 200914     Cash account 48000     Instalment note payable 152914 31.12.17 Instalment notes payable Dr. 33437.74 Interest expense Account Dr. 13762.26     Cash account 47200 31.12.18 Instalment notes payable Dr. 36447.14 Interest expense Account Dr. 10752.86     Cash account 47200 31.12.19 Instalment notes payable Dr. 39727.38 Interest expense Account Dr. 7472.62     Cash account 47200 31.12.20 Instalment notes payable Dr. 43301.74 Interest expense Account Dr. 3898.26     Cash account 47200