Question

DueNorth Mining Inc. purchased some crushing equipment on July 1, 2020 for $308,000. A down payment of $28,000 was required and the remainder was financed with a 7% instalment loan payable over 5 years with payments made on a quarterly basis. The quarterly payments required are $16,714 and include both interest and principal. The following is an extract from the loan amortization table the supplier provided to DueNorth : Payment Dates Beginning loan balance Payment Interest Principal Ending loan balance 9/30/20 $280,000 $16,714 $4,900 $11,814 $268,186 12/31/20 268,186 16,714 4,693 12,021 256,165 3/31/21 256,165 16,714 4,483 12,231 243,934 6/30/21 243,934 16,714 4,269 12,445 231,489 9/30/21 231,489 16,714 4,051 12,663 218,826 12/31/21 218,826 16,714 3,829 12,885 205,941

(a) Prepare the journal entries for the purchase of the equipment and the first 2 quarterly payments in 2020 (use Long-Term Loan Payable account). (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.) Date Account Titles and Explanation Debit Credit July 1, 2020Sept. 30, 2020Dec. 31, 2020 Sept. 30, 2020 Dec. 31, 2020

Answer 1

Solution a:

Journal Entries
Date	Particulars	Debit	Credit
1-Jul-20	Equipment Dr	$308,000.00
	To Cash		$280,000.00
	To Notes Payable		$28,000.00
	(To record equipment purchased)
30-Sep-20	Interest expense Dr	$4,900.00
	Notes payable Dr	$11,814.00
	To Cash		$16,714.00
	(To record installment payment)
31-Dec-20	Interest expense Dr	$4,693.00
	Notes payable Dr	$12,021.00
	To Cash		$16,714.00
	(To record installment payment)