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Blossom Inc. decided to purchase equipment from Central Ontario Industries on January 2, 2020, to expand its production capacity to meet customers' demand for its product. Blossom issued a $861,000, 6-year, non-interest-bearing note to Central Ontario for the new equipment when the prevailing market interest rate for obligations of this nature was 10%. The company will pay off the note in 6 $143.500 instalments due at the end of each year of the note's life.(The tables in this problem are to be used as a reference for this problem.) Click here to view the factor table PRESENT VALUE OF 1. Click here to view the factor table PRESENT VALUE OF AN ANNUITY OF 1. Your answer is partially correct. Prepare the journal entry at the date of purchase. Calculate the purchase price using any of the three methods (tables, financial calculator, or Excel). (Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter for the amounts. Round factor values to 5 decimal places, e.g. 1.25124 and final answers to decimal places, e.g. 5,275.) Date Account Titles and Explanation Debit Credit Jan. 2, 2020 Equipment 624986 Purchase Discounts 236014 - Your answer is partially correct. Prepare the journal entries at the end of the first year to record the payment of principal and interest, assuming that the company uses the effective interest method. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter for the amounts. Round final answers to decimal places, eg. 5,275.) Date Account Titles and Explanation Debit Credit Dec. 31, 2020 Interest Expense 62499 Notes Payable 192000 Jan. 2, 2021 Cash DOHOD 192000 Purchase Discounts 62499 Prepare the journal entries at the end of the second year to record the payment of principal and interest. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter for the amounts. Round final answers to 0 decimal places, e.g. 5,275.) Date Account Titles and Explanation Debit Credit Dec. 31, 2021 Interest Expense 49548 Notes Payable 192000 Jan. 2, 2022 Cash DOO!! pod OO 192000 Purchase Discounts 19548 Your answer is correct. Assuming that the equipment has an 8-year life and no residual value, prepare the journal entry that is needed to record depreciation in the first year. (The straight-line method is used.) (Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No Entry"for the account titles and enter for the amounts. Round final answers to decimal places, eg. 5,275.) Date Account Titles and Explanation Debit Credit Dec. 31 2020 Depreciation Expense 78123 Accumulated Depreciation - Equipment 78123
