Olsen Well Services Ltd. purchased equipment for $905,000 on September 30, 2021. The equipment was purchased with

Question:

Olsen Well Services Ltd. purchased equipment for $905,000 on September 30, 2021. The equipment was purchased with a $137,000 cash down payment and through the issue of a $768,000, 5-year, 3.6% mortgage note payable for the balance. The terms provide for the mortgage to be repaid in monthly blended payments of $14,006 starting on October 31. 


Instructions

a. Record the issue of the note payable on September 30.

b. Record the first two instalment payments on October 31 and November 30. Round amounts to the nearest dollar.

c. Repeat part (b) assuming that the terms provided for monthly fi xed principal payments of $12,800, rather than blended payments of $14,006.


Taking It Further

If the instalments are fixed principal payments of $12,800, will the interest expense over the life of the note be greater than, the same as, or less than if the instalments are a blended payment of $14,006? Explain.

Fantastic news! We've Found the answer you've been seeking!

Step by Step Answer:

Related Book For  book-img-for-question

Accounting Principles Volume 2

ISBN: 978-1119502555

8th Canadian Edition

Authors: Jerry J. Weygandt, Donald E. Kieso, Paul D. Kimmel, Barbara Trenholm, Valerie Warren, Lori Novak

Question Posted: