Blossom Inc. decided to purchase equipment from Central Ontario Industries on January 2, 2020, to expand its

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Question:

Blossom Inc. decided to purchase equipment from Central Ontario Industries on January 2, 2020, to expand its production capacity to meet customers’ demand for its product. Blossom issued a $861,000, 6-year, non–interest-bearing note to Central Ontario for the new equipment when the prevailing market interest rate for obligations of this nature was 10%. The company will pay off the note in 6 $143,500 instalments due at the end of each year of the note’s life.

Prepare the journal entry at the date of purchase. Calculate the purchase price using any of the three methods (tables, financial calculator, or Excel). (Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts. Round factor values to 5 decimal places, e.g. 1.25124 and final answers to 0 decimal places, e.g. 5,275.)

Date	Account Titles and Explanation	Debit	Credit
Jan. 2, 2020

Prepare the journal entries at the end of the first year to record the payment of principal and interest, assuming that the company uses the effective interest method. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts. Round final answers to 0 decimal places, e.g. 5,275.)

Date	Account Titles and Explanation	Debit	Credit
Dec. 31, 2020

Jan. 2, 2021

Prepare the journal entries at the end of the second year to record the payment of principal and interest. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts. Round final answers to 0 decimal places, e.g. 5,275.)

Date	Account Titles and Explanation	Debit	Credit
Dec. 31, 2021

Jan. 2, 2022

Assuming that the equipment has an 8-year life and no residual value, prepare the journal entry that is needed to record depreciation in the first year. (The straight-line method is used.) (Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts. Round final answers to 0 decimal places, e.g. 5,275.)