ABC Moving and Storage acquired a new truck for $100,000, paying $20,000 cash and signing a promissory note for the balance. According to the bill of sale, ABC also paid cash for sales tax of 8%, plus registration, tags and delivery fees of $400. The new truck is estimated to have a 5-year economic life and a residual (salvage) value of $8,400. ABC uses straight-line depreciation. Due to delays, the truck was not placed in service until April 1, 2020. ABC has a December 31 fiscal year.

Question

Refer to problem 1. The promissory note that ABC signed to pay for the balance of the truck is dated April 1, 2020. The interest rate is 6% and payment terms are $40,000 plus interest due on March 31, 2021 and the balance due, plus interest, on March 31, 2022. Prepare journal entries required on December 31, 2020, March 31, 2021, December 31, 2021 and March 31, 2022. Show calculations.