On July 31, 2015, Myron Corporation purchased equipment for $750,000. The equipment was purchased with a $50,000 down payment and by borrowing a four-year, 6%, $700,000 bank loan payable for the balance. The terms provide for the bank loan to be repaid with monthly blended principal and interest instalment payments of $16,440 starting on August 31. Myron has a September 30 year end.
Instructions
(a) Record the purchase of equipment and the receipt of the bank loan on July 31.
(b) Record the first two instalment payments, on August 31 and September 30. Round all amounts to the nearest dollar.
(c) Repeat part (b) assuming that the terms provide for monthly fixed principal payments of $14,583, plus interest, rather than blended payments of $16,440.