On January 1, 2012, a Company Purchased a Machine That

question 61

Essay

On January 1, 2012, a company purchased a machine that had a list price of $23,500.The purchase terms agreed upon were: cash down payment $12,000 plus a 15% note payable of $9,132 (its present value).The note is payable in three equal annual instalments (interest plus principal)on each December 31.Round to the nearest dollar.
Required:
(a)Give the entry to record the acquisition of the machine.
(b)Give the adjusting entry required on September 30, 2014, for interest assuming this is the end of the accounting period.

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Definitions:

Journal Entry

A record in accounting that represents a business transaction, indicating the effects on each affected account in debit and credit formats.

Consolidated Statement

Another term for consolidated financial statements, which combine the financial data of a parent company with its subsidiaries into a single comprehensive reporting document.

Shareholders' Equity

The residual interest in the assets of a company after deducting liabilities, representing the ownership stake of shareholders.

Acquisition Date

The date on which control of the assets of the acquired entity is transferred to the acquirer.