Problem 1 On January 2, 20x8, the Todd Company acquired a truck with a list price of...

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Accounting

Problem 1
On January 2, 20x8, the Todd Company acquired a truck with alist price of $400,000. The Todd Company's incremental borrowingrate is 8% (imputed rate). Assume that the
truck manufacturer is offering Todd the following terms (eachsituation is independent). For each of the terms, prepare thejournal entries for the life of the note. Assume a December 31 yearend.
Todd company is a publicly accountable company.
a) Todd Company has to make equal annual payments of principaland interest over five years. Payments are due on December 31 ofevery year. The interest rate charged is 10%.
b) Todd Company pays the $400,000 in three years. No interest ischarged on the note.
c) Todd Company pays the $400,000 in three years. Interest of 3%is charged on the note payable on December 31 of every year.
d) Todd Company pays $80,000 on the principal at the end ofevery year, over 5 years. No interest is charged.
e) Todd Company has to make equal annual payments of principaland interest over five years. The interest rate charged is 4%.

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4.5 Ratings (950 Votes)

The Journal Entries given below situation wise all amount in Entry in Todd company during the acquired Truck Rs 400000 January 2 2018 Truck Account Dr 400000 To Truck Manufacturer 400000 Situation1 December 31 2018 Interest Dr 40000 To Truck Manufacturer 40000 December 31 2018 Turck Manufacturer Dr 105519 To BankCash 105519 December 31 2019 Interest Dr 33448 To Truck Manufacturer 33448 December 31 2019 Turck Manufacturer Dr 105519 To BankCash 105519 December 31 2020 Interest Dr 26241 See Answer

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Problem 1On January 2, 20x8, the Todd Company acquired a truck with alist price of $400,000. The Todd Company's incremental borrowingrate is 8% (imputed rate). Assume that thetruck manufacturer is offering Todd the following terms (eachsituation is independent). For each of the terms, prepare thejournal entries for the life of the note. Assume a December 31 yearend.Todd company is a publicly accountable company.a) Todd Company has to make equal annual payments of principaland interest over five years. Payments are due on December 31 ofevery year. The interest rate charged is 10%.b) Todd Company pays the $400,000 in three years. No interest ischarged on the note.c) Todd Company pays the $400,000 in three years. Interest of 3%is charged on the note payable on December 31 of every year.d) Todd Company pays $80,000 on the principal at the end ofevery year, over 5 years. No interest is charged.e) Todd Company has to make equal annual payments of principaland interest over five years. The interest rate charged is 4%.