On September 30, 2011, Atwater Corporation purchased a piece of equipment for $550,000. The equipment was purchased with a $50,000 down payment and a three-year, 8%, $500,000 mortgage for the balance. The terms provide for payment of the mortgage with quarterly fixed principal payments of $41,667, plus interest, starting on December 31. Atwater has a December 31 year end.
Instructions
(a) Record the purchase of equipment on September 30, 2011.
(b) Record the first two instalment payments, on December 31, 2011, and March 31, 2012. Round all amounts to the nearest dollar.
(c) Repeat part (b) assuming that the terms provide for quarterly blended principal and interest payments of $47,280, rather than fixed principal payments of $41,667, plus interest.