Cardinals Corporation purchased a computer on December 31, 2013, for $274,365, paying $78,390 down and agreeing to pay the balance in five equal installments of $39,195 payable each December 31 beginning in 2014. An assumed interest rate of 8% is implicit in the purchase price.
Prepare the journal entry at the date of purchase.
Date Account Titles Debit Credit
12/31/13
Equipment
Discount on Notes Payable
Notes Payable
Cash
Prepare the journal entry at December 31, 2014, to record the payment and interest (effective interest method employed).
Date Account Titles Debit Credit
12/31/14
Interest Expense
Notes Payable
Cash
Discounts on Notes Payable
Prepare the journal entry at December 31, 2015, to record the payment and interest (effective interest method employed).
Date Account Titles Debit Credit
12/31/15
Interest Expense
Notes Payable
Cash
Discounts on Notes Payable