Accounting Help Please!!!

timer Asked: May 1st, 2015

Question description

1. a.  Stonnel  Corporation bought a new machine on January 1, 2014 and agreed to pay for it in 5 equal installments of $40,000 on December 31st, 2014 and December 31 of each of the next 4 years.  Assuming that the prevailing rate of 8% applies to this contract, how much should Stonnel record as the cost of the machine? 

b. Prepare the entry that Stonnel 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.

c. Prepare the entry or entries required for the first payment.

d. How will Stonnel’s note appear on the December 31st, 2014 balance sheet? Include the section of the balance sheet and the presentation, with numbers.

2. Refer to question 1.  Answer each question again, including preparation of an amortization schedule 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

c. Entry or entries required for the first payment.

d. Presentation of note on December 31, 2014 balance sheet.

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