Log in

View Full Version : Journal entry on vehicle purchase with interest rate


mahu21
Sep 29, 2008, 04:18 PM
How would I write a journal entry and adjusting entry for the purchase of a vehice with the following given information?

Purchase a truck for $15,000 on a 8% note
truck has useful life of 7 years with no salvage value
monthy payment of $400, includes principal and interest

pready
Oct 15, 2008, 03:05 PM
The Journal Entry for the purchase of the Vehicle is:

Debit Equipment for 15,000
Credit Notes Payable for 15,000
(Purchase truck with 8% Note).

You should have a journal entry each month for the payment of the truck.

Debit Notes Payable for the Principal Paid
Debit Interest Expense for the Interest Paid
Credit Cash for the whole payment of 400

The adjusting entry at the ened of the accounting period is:

Debit Depreciation Expense for the amount of Depreciation
Credit Accumulated Depreciation for the amount

Depreciation has different methods such as Straight line, double Declining Balance and Sum of the Years Digits to name a few. You will need to know what method to use before you can figure out the Depreciation Amount.