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Copper Corp. obtained a $500,000 loan from Last Chance Bank on January 1, 2016. It purchased a piece of heavy equipment for $450,000 on January 2, 2016 and paid some accounts payable with the balance on the same day. The loan bears interest at 4% per year on the unpaid balance and is repayable in three annual blended payments of $187,381 on December 31 each year, starting in 2017 (that is, no payments are required until two years after receiving the loan). Assume interest accrues in the meantime.
Required:
- Prepare the journal entries to record the following transactions:
- Receipt of loan proceeds from the bank
- Purchase of the equipment and payment of the accounts payable.
- Prepare the loan repayment schedule.
- Prepare the journal entry to record the first loan payment.
- Prepare a partial balance sheet showing the loan liability at December 31, 2016.
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