I was wondering if someone could help me with some journal entries...

It says : borrowed 100,000 at 9% interest from the local bank to finance the purchase of equipment with a cost of 150,000. The equipment has a 10 year life and a 20,000 residual value. The note is for 5 years with interest paid annually each Oct. 2.


I am guessing:

Debit interest expense (100000 x 9%)
credit residual value 20,000
debit gain on account 11,000


can you please help?

Quote:

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Originally Posted by aesmeier

i was wondering if someone could help me with some journal entries...

It says : borrowed 100,000 at 9% interest from the local bank to finance the purchase of equipment with a cost of 150,000. The equipment has a 10 year life and a 20,000 residual value. The note is for 5 years with interest paid annually each Oct. 2.


I am guessing:

Debit interest expense (100000 x 9%)
credit residual value 20,000
debit gain on account 11,000


can you please help?

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When done the loan, your entry is
Debit bank 100000
Credit loan liab. 100000
When got the equipment,
Debit equipment 150000
Credit bank 150000
When time to record interest
Debit interest expenses (calculate interest base on number of month)
Credit loan liab.
When year end
Debit amertization expenses
Credit accum. Amort.