Fold and Hold Corporation Purchased a Machine Which Had a Current

question 35

Short Answer

Fold and Hold Corporation purchased a machine which had a current cash equivalent cost of $38,971 on January 1,2010.Fold and Hold paid cash of $10,000 and signed an interest-bearing note for the balance,payable in six equal annual installments on each December 31 beginning with December 31,2010.The note specified a 10% interest rate on the unpaid balance.
Requirements:
A.Prepare the journal entry to record the purchase on January 1, 2010 (round to the nearest dollar).
B.Prepare the entry to record the first installment payment on December 31, 2010 (round to the nearest dollar).Assume that no adjusting entries have been made during the year.

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Definitions:

Mirror Image Rule

A principle in contract law that requires acceptance to be on exactly the same terms as the offer to result in a contract.

Common Law

A body of law derived from judicial decisions and precedents rather than statutes, predominant in countries like the UK and the US.

Woodshed

Informally refers to the process of practicing or improving skills in private, often used in a musical context.

Enforceable Contract

A legally binding agreement that can be upheld in court and compels parties to fulfill their contractual obligations.