Relay Company purchases equipment by making a down payment of $14,000 cash. In addition, Relay signs a note requiring monthly payments of $2,800, starting one month after purchase and continuing for a total of 20 months. The contract calls for no interest, yet the prevailing interest rate is 12% on similar transactions. a. Record the entry required for the purchase of this equipment. b. Record the entry to recognize interest expense, one month after this purchase. Ignore the cash payment part of the transaction. • Note: Round your answers to the nearest whole number. a. Equipment Account Name Discount on Note Payable Cash Note Payable To record the purchase of equipment. b. Equipment. Cash To record the interest incurred. v V V V V Dr. 64,528 5,472 0 0 138 0 Cr. 0✔ 0✔ 14,000✔ 56,000✔ 0x 28 x
Relay Company purchases equipment by making a down payment of $14,000 cash. In addition, Relay signs a note requiring monthly payments of $2,800, starting one month after purchase and continuing for a total of 20 months. The contract calls for no interest, yet the prevailing interest rate is 12% on similar transactions. a. Record the entry required for the purchase of this equipment. b. Record the entry to recognize interest expense, one month after this purchase. Ignore the cash payment part of the transaction. • Note: Round your answers to the nearest whole number. a. Equipment Account Name Discount on Note Payable Cash Note Payable To record the purchase of equipment. b. Equipment. Cash To record the interest incurred. v V V V V Dr. 64,528 5,472 0 0 138 0 Cr. 0✔ 0✔ 14,000✔ 56,000✔ 0x 28 x
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:Relay Company purchases equipment by making a down payment of $14,000 cash. In addition, Relay signs a note requiring monthly payments of $2,800, starting one month after purchase and continuing for a total of 20 months.
The contract calls for no interest, yet the prevailing interest rate is 12% on similar transactions.
a. Record the entry required for the purchase of this equipment.
b. Record the entry to recognize interest expense, one month after this purchase. Ignore the cash payment part of the transaction.
• Note: Round your answers to the nearest whole number.
a.
Account Name
Equipment
Discount on Note Payable
Cash
Note Payable
To record the purchase of equipment.
b. Equipment
Cash
To record the interest incurred.
>
>
Dr.
64,528
5,472
0
0
138
0
Cr.
0
0
14,000
56,000
0x
28 x
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