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1. a. Balish Corp bought a new machine on January 1,
2015 and agreed to pay for it in 5 equal installments of $40,000 on December 31st,
2015 and December 31 of each of the next 4 years. Assuming that the prevailing rate of 8%
applies to this contract, how much should Balish record as the cost of the
b. Prepare the entry that Balish would make
to record the purchase of the machinery if the company signed a note where
interest was included in the face amount of the note.
2. Refer to question
1. Answer each question again assuming that interest was not
included in the face amount of the note.
a. Cost of the machine
b. Journal entry to
record the purchase