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A company has decided to purchase equipment, needing to borrow $100,000 from its local bank to make the purchase. The bank gives the company two options: (a) 60-month installment note with 4% interest or (b) 120- month installment note with 8% interest. Lenders often charge a higher interest rate for longer-term loans to compensate for additional risk of lending for a longer time period.

A company has decided to purchase equipment, needing to borrow $100,000 from its local bank to make the purchase. The bank gives the company two options: (a) 60-month installment note with 4% interest or (b) 120- month installment note with 8% interest. Lenders often charge a higher interest rate for longer-term loans to compensate for additional risk of lending for a longer time period.

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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A company has decided to purchase equipment, needing to borrow $100,000 from its local bank to make the purchase. The bank gives the company two options: (a) 60-month installment note with 4% interest or (b) 120- month installment note with 8% interest. Lenders often charge a higher interest rate for longer-term loans to compensate for additional risk of lending for a longer time period. Required: Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 Required 4 Required 5 Required 6 Record the first monthly payment of the 120-month installment note with 8% interest View transaction list Journal entry worksheet 1 Record the first monthly payment of the 120-month installment note with 8% interest. Note: Enter debits before credits. Transaction 1 General Journal Debit Credit
Transcribed Image Text:A company has decided to purchase equipment, needing to borrow $100,000 from its local bank to make the purchase. The bank gives the company two options: (a) 60-month installment note with 4% interest or (b) 120- month installment note with 8% interest. Lenders often charge a higher interest rate for longer-term loans to compensate for additional risk of lending for a longer time period. Required: Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 Required 4 Required 5 Required 6 Record the first monthly payment of the 120-month installment note with 8% interest View transaction list Journal entry worksheet 1 Record the first monthly payment of the 120-month installment note with 8% interest. Note: Enter debits before credits. Transaction 1 General Journal Debit Credit
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