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On May 1, 2019, Blantons Corp. purchased equipment. The equipment had a list price of $220,000. Because it was a favored customer of the dealer,
On May 1, 2019, Blantons Corp. purchased equipment.
- The equipment had a list price of $220,000. Because it was a favored customer of the dealer, the dealer discounted the price to Blantons by $5%. The dealer also offered to finance 90% of the total after-discount price plus the sales tax at the rate of 6.0% for 18 months at a rate of 2.4% per year. No payments are due on the note until it matures. Blantons accepted those terms, signed the corresponding note payable, and delivered cash for the amount not financed.
- In addition to the amounts noted above, Blantons paid in cash shipping charges of $1,240, installation charges of $1,100, and $2,350 to repair damage to the equipment that occurred between the time it was delivered and the time it was installed.
- Once the equipment was operational, Blantons spent $2,150 for print and radio advertising to raise awareness of the advanced capabilities the new equipment allowed it to provide its customers.
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- Prepare the journal entry for each of items a. through c.
- What is Blantons cost of the equipment for financial reporting purposes?
- Assume the answer to ii. is $225,000. How much depreciation expense will Blantons record in 2019 and 2020 if it uses straight-line method, the half-year convention and a useful life of 10 years? How much depreciation expense will Blantons record in 2019 and 2020 if it uses the double declining balance method, the half-year convention and a useful life of 10 years?
- What year-end 2019 adjusting entry is required for the note payable assuming that Blantons accrues interest only at year end?
- Is the note payable a current liability or long-term liability at December 31, 2019? Explain your answer.
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