Phil has decided to start snow plowing during the winter months. He purchased a heavy-duty dump truck with plow and salter from Power Equipment for $40,000 on October 1st, 2026. He paid $1,000 as a down payment and the remaining balance on a 5% -7 year note to Power Equipment.

1. Write a check to record the entire purchase (down payment and capitalization of the truck and related liability). Use check number 171. You may find it helpful to write out the journal entry first.

2. Prepare amortization schedules for the purchase of the Truck with snow plow. Phil wants to know the total interest cost if he made monthly payments or quarterly payments. You will calculate the payments using the PMT function. Your amortization table should show the principal and interest amount for each payment for the entirety of the loan. The payments will begin on December 1st, 2026. Highlight the total interest paid for each option.

3. Phil opted for the monthly payment schedule because it will lead to the lowest overall cost of the truck. Record the first payment, use check number 182.

4. Prepare the Deprecation schedule for this dump truck with plow. Use the suggested life from an IRS publication 946, Chapter 4, Under Property Classes. Phil believes the salvage (residual) value will be $10,000 after its useful life. Phil will use the straight-line depreciation method for accounting purposes. Hint: In the first year and last year you will have partial depreciation. Include a column for Accumulated Depreciation and Book Value.

5. Prepare the adjusting journal entry for depreciation expense using the depreciation table you created (in #4). Record this journal entry as of December 31st, 2026. Journal Number AJE12.

Then prepare the adjusting journal entry for the interest accrual on the notes payable using the amortization table you created. Also record this journal entry as of December 31st, 2026. Journal Number AJE13

Answer rating: 100% (QA)

SOLUTION 1 Journal Entry to Record the Purchase Date October 1 2026 Account Debit Credit Truck with plow 40000 Notes payable 39000 Cash 1000 To record ... View the full answer