Question

Exercise 10-14 Bramble Inc. has decided to purchase equipment from Central Michigan Industries on January 2, 2020, to expand its production capacity to meet customers’ demand for its product. Bramble issues a(n) $720,000, 5-year, zero-interest-bearing note to Central Michigan for the new equipment when the prevailing market rate of interest for obligations of this nature is 12%. The company will pay off the note in five $144,000 installments due at the end of each year over the life of the note.

Prepare the journal entry at the date of purchase. (Round factor values to 5 decimal places, e.g. 1.25124 and final answers to 0 decimal places, e.g. 5,275. Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.) Account Titles and Explanation Debit Credit SHOW LIST OF ACCOUNTS LINK TO TEXT

Prepare the journal entry at the end of the first year to record the payment and interest, assuming that the company employs the effective-interest method. (Round answers to 0 decimal places, e.g. 5,275. Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.) Account Titles and Explanation Debit Credit SHOW LIST OF ACCOUNTS LINK TO TEXT

Prepare the journal entry at the end of the second year to record the payment and interest. (Round answers to 0 decimal places, e.g. 5,275. Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.) Account Titles and Explanation Debit Credit SHOW LIST OF ACCOUNTS LINK TO TEXT

Assuming that the equipment had a 10-year life and no salvage value, prepare the journal entry necessary to record depreciation in the first year. (Straight-line depreciation is employed.) (Round answers to 0 decimal places, e.g. 5,275. Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.) Account Titles and Explanation Debit Credit

Answer 1

Answer Page No o 0 Journal contey eie the date of purchase Equipment = $420,000 + $720,000 pi-(1+127.)-57 [ 124% - 720,000 + $720,000 3.60478 2 - $199735 + $ 420,000 - $520265 Discount on notes payable = $199735 Particular Debit I Credit Equipment $520265 Discount on notes payable $199735 Notes payable $420,000 Lowrnal entren Intest expenses = $520 265. X 12%. $ 62432 Notes payable = $144000

Page: No@ Credit Debit $ 144000 Particular Notes payable Paberesf expenses cash Discount on notes payable 662432 $144000 $ 62432 Towinal centeng Interest expenses = ( 520 265 - $62432) x 12% = $54940 Particular Debit I Gredit Notes payable $ 144000 Interest expenses $54940 $ 144000 Discount on notes payable $54940 Jovernal entory Depreciation expense = 520265 = $52027 Particular Debit Credit Depreciation expenses $52027 Accumulated depreciation $52027 cash A to yrs