Solar Power Corporation purchased equipment for $900,000 on September 30, 2021. The equipment was purchased with a $150,000 down payment and the issue of a $750,000, 3-year, 3.6% mortgage note payable for the balance. The terms provide for quarterly blended payments of $66,216 starting on December 31. Solar Power’s year end is December 31. 

Instructions

a. Record the purchase of equipment on September 30, 2021.

b. Record the first two instalment payments on December 31, 2021, and March 31, 2022.

c. Repeat part (b) assuming that the terms provided for quarterly fixed principal payments of $62,500, rather than blended payments of $66,216.

Taking It Further

What will be the total interest expense over the life of the note if blended payments of $66,216 are made on a quarterly basis over three years?