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-   -   Journal entry on vehicle purchase with interest rate (https://www.askmehelpdesk.com/showthread.php?t=264961)

  • Sep 29, 2008, 04:18 PM
    mahu21
    journal entry on vehicle purchase with interest rate
    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
  • Oct 15, 2008, 03:05 PM
    pready

    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.

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