During 2010, Redford Company acquired a new piece of equipment for its manufacturing process.In order to purchase the equipment, Redford 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 est ablished cash price of $\$ 220,000$ . Prepare the jounal entry to record the transaction under this additional assumption

Question

During 2010, Redford Company acquired a new piece of equipment for its manufacturing process.In order to purchase the equipment, Redford 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 est ablished cash price of

\$ 220,000

. Prepare the jounal entry to record the transaction under this additional assumption

Princess joy Lungayan · Accepted Answer

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