Chapter 14 Notes Payable (15 points)

Watson, Inc. purchased a piece of equipment on January 1, 2018. The equipment has a list price of $100,000 and the seller offers you financing at 2 percent. Under the agreement you will make three annual payments with the first payment on January 1, 2019. Your current incremental borrowing rate is 6 percent.

Instructions Determine the annual payment required under the agreement.

A.Determine the annual payment required under the agreement.

B.Determine the purchase price of the equipment on January 1, 2018

C.Complete the following table for the first two payments (January 1, 2019 and January 1, 2020)

		Interest	Principal	Note Payable
Period	Payment	Expense	Reduction	Balance
0 (1/1/2018)
1 (1/1/2019)
2 (1/1/2020)