Information Company purchased an asset with a cash equivalent value of $70,000 on January 1, 2016. Arrangements were made with the supplier to pay $10,000 cash on January 1, 2016, 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 2016, 2017, and 2018. Each payment will include principal plus interest on the unpaid balance at 11% per year.
Required:
A.Complete the following table:

B.Prepare the journal entry for the payment on December 31, 2017.
C.Explain the change, over time, on the amount of interest and the balance of the debt principal.

Question

Information Company purchased an asset with a cash equivalent value of $70,000 on January 1, 2016. Arrangements were made with the supplier to pay $10,000 cash on January 1, 2016, 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 2016, 2017, and 2018. Each payment will include principal plus interest on the unpaid balance at 11% per year.
Required:
A.Complete the following table:
  
B.Prepare the journal entry for the payment on December 31, 2017.
C.Explain the change, over time, on the amount of interest and the balance of the debt principal.

Quizplus · Accepted Answer

The Answer of Information Company purchased an asset with a cash equivalent value of $70,000 on January 1, 2016. Arrangements were made with the supplier to pay $10,000 cash on January 1, 2016, 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 2016, 2017, and 2018. Each payment will include principal plus interest on the unpaid balance at 11% per year.
Required:
A.Complete the following table:
  
B.Prepare the journal entry for the payment on December 31, 2017.
C.Explain the change, over time, on the amount of interest and the balance of the debt principal.

Information Company Purchased an Asset with a Cash Equivalent Value