On September 30, 2017, Coldwater Corporation purchased equipment for $1.1 million. The equipment was purchased with a $100,000 down payment and a three-year, 4%, $1-million bank loan for the balance. The terms provide for payment of the bank loan with quarterly fixed principal payments of $83,333, plus interest, starting on December 31. Coldwater has a November 30 year end and records adjusting entries annually.
Instructions
(a) Record the purchase of equipment on September 30, 2017.
(b) Record the accrual of interest expense on November 30, 2017. Round to the nearest dollar.
(c) Record the first two instalment payments, on December 31, 2017, and March 31, 2018. Round all amounts to the nearest dollar.
(d) Repeat parts P10.3A(b) and P10.3A(c) assuming that the terms provide for quarterly blended principal and interest payments of $88,849, rather than fixed principal payments of $83,333, plus interest.