Question

1. the company can purchase the equipment by borrowing $251,000 with a 21-month, 12% installment note. payments of $13,310.7

2 are due at the end of each month, and the first installment is due on january 31, 2024. record the issuance of the installment note payable for the purchase of the equipment.

Answer 1

The equipment purchase is recorded by debiting the Equipment account for $251,000 and crediting the Installment Note Payable account for $251,000.

Installment Note Payable for Equipment Purchase

Transaction: Issuance of an installment note payable for $251,000 to purchase equipment.

Date: January 31, 2024

Interest Rate: 12%

Term: 21 months (monthly payments)

Payment Amount: $13,310.72

Journal Entry:

Debit: Equipment: $251,000

Credit: Installment Note Payable: $251,000

Step-by-step explanation:

We Debit the Equipment account with the full purchase price of $251,000, as this asset is now owned by the company.

We Credit the Installment Note Payable account with $251,000 to record the new liability incurred due to the loan.