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PartA? Jan 1st, 2020: Tony Inc. buys a machine from Avengers Inc. and will make 3...

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Accounting

PartA? Jan 1st, 2020: Tony Inc. buysa machine from Avengers Inc. and will make 3 equal payments of200,000 over the next 18 months (payments on June 30, 2020; Dec 31,2020; and June 30, 2021). The interest rate on this annuity is14%. Record all the journal entries from Jan1st 2020 until the expiration of the annuity. (4 points)Assume the machine does not depreciate.

Part B: Create the balance sheet as of December31st, 2020 along with the income statement and cash flowstatement for the time period of Jan 1st, 2020 to Dec31st,2020 (6 points) (There might have a $1rounding issue

Answer & Explanation Solved by verified expert
4.3 Ratings (586 Votes)

Calculation of Present Value:
Payments Dis. Factor @ 7% PV
200000 0.9346 186916
200000 0.8734 174688
200000 0.8163 163260
524863
Repayment Schedule:
Date Opening Interest @ 14% p.a. Principal Payment Instalment Closing
30-06-2020 524863 36740 163260 200000 361604
31-12-2020 361604 25312 174688 200000 186916
30-06-2021 186916 13084 186916 200000 0
Journal Entries:
Date Account Debit Credit
01-01-2020 Machine Dr 524863
To Loan from Avengers Inc. 524863
30-06-2020 Loan from Avengers Inc. Dr 163260
Interest Expense Dr. 36740
To Cash 200000
31-12-2020 Loan from Avengers Inc. Dr 174688
Interest Expense Dr. 25312
To Cash 200000
30-06-2021 Loan from Avengers Inc. Dr 186916
Interest Expense Dr. 13084
To Cash 200000
Income Statement for Jan 1st, 2020 to Dec 31st,2020
Particulars Amount ($)
Interest Expense 62053 =36740+25312
Balance Sheet as on December 31st, 2020
Assets Amount ($)
Machine 524863
Cash -400000
Total 124863
Equity & Liabilities Amount ($)
Reserves & Surplus -62053
Loan from Avengers Inc. 186916
Total 124863
Cash Flow Statement for Jan 1st, 2020 to Dec 31st,2020
Cash Flow from Investing Activities
Payment of installment for machine -400000

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