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Fold and Hold Corporation purchased a machine which had a current cash equivalent cost of $38,971 on January 1, 2006. Fold and Hold paid cash of...

Fold and Hold Corporation purchased a machine which had a current cash equivalent cost of $38,971 on January 1, 2006. Fold and Hold paid cash of $10,000 and signed an interest-bearing note for the balance, payable in six equal annual installments on each December 31 beginning with December 31, 2006. The note specified a 10% interest rate on the unpaid balance.
1.Give the entry to record the purchase on January 1, 2006 ( round to the nearest dollar)
2.Give the entry to record the first installment payment on December 31,2006 ( round to the nearest dollar)
Fold and Hold Corporation purchased a machine which had a current cash equivalent cost of $38,971 on January 1, 2006. Fold and Hold paid cash of $10,000 and signed an interest-bearing note for the balance, payable in six equal annual installments on each December 31 beginning with December 31, 2006. The note specified a 10% interest rate on the unpaid balance.
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CH240310_5787_ACC.doc

Solution:
The Payment Schedule will be as follows:
Date
Interest Accrued
Amount O/S + Interest
Cash Paid
Amount O/S
1-Jan-06
38971
10000
28971
31-Dec-06
2897
31868
6652
25216
31-Dec-07
2522
27738...

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