During 2014, Red Company Acquired a New Piece of Equipment

question 37

Essay

During 2014, Red Company acquired a new piece of equipment for its manufacturing process. In order to purchase the equipment, Red made a down payment of $50,000 and issued a $200,000 five-year, 7% note. The annual payment of principal and interest was to be $48,778. The market rate of interest for obligations of this kind is 12%. The present value factor for an ordinary annuity of 5 years at 12% is 3.604776.
Required:
a. Prepare the journal entry to record the acquisition.
b. Assume that the equipment had an established cash price of $220,000. Prepare the journal entry to record the transaction under this additional assumption.

---

Definitions:

Wartime Rape

Sexual assaults committed against individuals as a method of warfare, used to terrorize or destabilize populations.

Universally Shared Attitude

A perspective or belief held in common across diverse cultures or societies.

Nation's Pride

The collective feeling of pride and allegiance that citizens have towards their country.

Myth

A traditional story, often involving supernatural beings or events, that serves to explain natural phenomena or cultural practices.