QUESTION 1: On January1, 2014, A company purchased equipment from B Company for $100,000. As payment for the equipment, A company issued an 6%, 3 year, installment note to be paid in equal annual payments at the end of each year.
1. Determine the annual payments A company must make on the note.
2. Prepare the journal entry for the purchase of the equipment.
3. Prepare the journal entry for the first two years of payment on the note.
QUESTION 2: Amortization Schedule - Discount
1. On December 31, 2017, the company redeemed all of the outstanding bonds at 104. Prepare the journal entries for this transaction.
Amortization Schedule - Premium
2. Does the interest expense, carrying value and amount of the amortization increased or decreased each period?