On January 1,2019,Information Company purchased an asset with a cash equivalent value of $70,000.Arrangements were made with the supplier to pay $10,000 cash on January 1,2019,and the balance was to be paid over a three-year period,with equal annual payments of $24,553 to be made at the end of 2019,2020,and 2021.Each payment will include principal plus interest on the unpaid balance at 11% per year.
A.Complete the following table:
*Round to reduce principal to zero.
B.Prepare the journal entry for the payment on December 31,2020.
C.Explain the change,over time,on the amount of interest and the balance of the debt principal.

Question

On January 1,2019,Information Company purchased an asset with a cash equivalent value of $70,000.Arrangements were made with the supplier to pay $10,000 cash on January 1,2019,and the balance was to be paid over a three-year period,with equal annual payments of $24,553 to be made at the end of 2019,2020,and 2021.Each payment will include principal plus interest on the unpaid balance at 11% per year.
A.Complete the following table:
  *Round to reduce principal to zero.
B.Prepare the journal entry for the payment on December 31,2020.
C.Explain the change,over time,on the amount of interest and the balance of the debt principal.

Quizplus · Accepted Answer

The Answer of On January 1,2019,Information Company purchased an asset with a cash equivalent value of $70,000.Arrangements were made with the supplier to pay $10,000 cash on January 1,2019,and the balance was to be paid over a three-year period,with equal annual payments of $24,553 to be made at the end of 2019,2020,and 2021.Each payment will include principal plus interest on the unpaid balance at 11% per year.
A.Complete the following table:
  *Round to reduce principal to zero.
B.Prepare the journal entry for the payment on December 31,2020.
C.Explain the change,over time,on the amount of interest and the balance of the debt principal.

On January 1,2019,Information Company Purchased an Asset with a Cash