DCL Industries Purchased a Supply of Mechanical Components from E

question 44

Essay

DCL Industries purchased a supply of mechanical components from E Corporation on November 1, 2013. In payment for the $48,000 purchase, DCL issued a one-year installment note to be paid in equal monthly payments at the end of each month. The payments include interest at the rate of 12%.
Required:
1. Prepare the journal entry for DCL's purchase of the components on November 1, 2013.
2. Prepare the journal entry for the first installment payment on November 30, 2013.
3. What is the amount of interest expense that DCL will report in its income statement for the year ended December 31, 2013?

---

Definitions:

Mutually Exclusive

Events or choices that cannot occur at the same time, requiring a selection to be made between them.

Payback Period

The duration of time it takes for an investment to generate an amount of income or cash equivalent to the cost of the investment, essentially measuring how quickly the investment can be recouped.

Time Value

The concept that money available now is worth more than the same amount in the future due to its potential earning capacity.

Payback Period

The time required for an investment to generate cash flows sufficient to recoup the original investment cost.