On January 1, 20X1, Newell Manufacturing purchased a new drill press that had a cash purchase price of $6,340. Newell decided instead to pay on an installment basis. The installment contract calls for four annual payments of $2,000 each beginning in one year. Newell was not required to make an initial down payment fort he drill press.

Required: 1. Verify that the imputed interest rate on the installment loan is 10%. That is, show that the present value of the payments Newell must make it $6,340 (rounded to nearest dollar) when discounted at a 10% rate of interest.

2. Determine the impact on the financials for the January 1, 20X1 purchase of the drill press.

3. Create an amortization schedule showing the annual interest expense, interest payment, and carrying value.