Question
Blanchard Inc. acquired a packaging machine from CCC Corporation. CCC Corporation completed construction of the machine on January 1, 2020. In payment for the $4
Blanchard Inc. acquired a packaging machine from CCC Corporation. CCC Corporation completed construction of the machine on January 1, 2020. In payment for the $4 million machine, Blanchard Inc. issued a three-year installment note to be paid in three equal payments at the end of each year. The payments include interest at the rate of 6%.
1. Prepare the journal entry for Blanchards purchase of the machine on January 1, 2020
January 1, 2020:
PVA(i=3%, n=3) = 2.82861, PVA(i=3%, n=6) = 5.41719, PVA(i=6%, n=3) = 2.67301, PVA(i=6%, n=6) = 4.917322. Prepare the partial amortization schedule for the first two years of the 3-year installment note
Amount of Loan | |
/ present value of an ordinary annuity (PVA) of $1 | |
Installment payment (Rounded up to the nearest integer) |
Date | Cash Payment | Effective Interest | Decrease in Balance | Outstanding Balance |
1/1/2020 | ||||
12/31/2020 | ||||
12/31/2021 | ||||
12/31/2022 | Not required | Not Required | Not Required | Not Required |
3. Prepare the journal entry for the installment payments on December 31, 2020 and December 31, 2021.
December 31, 2020:
December 31, 2021
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