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Hamlet Corporation purchases computer equipment at a price of $100,000 on January 1, 2016, paying $40,000 down and agreeing to pay the balance in three
Hamlet Corporation purchases computer equipment at a price of $100,000 on January 1, 2016, paying $40,000 down and agreeing to pay the balance in three $20,000 annual installments beginning December 31, 2016. It is not possible to value either the equipment or the $60,000 note directly; however, Hamlets incremental borrowing rate is 12%.
Required:
1. | Prepare a schedule to compute the interest expense and discount amortization on the note. |
2. | Prepare all the journal entries for Hamlet to record the issuance of the note, each annual interest expense, and the three annual installment payments. |
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