Prepare the journal entry to record the purchase

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Problem - Acquisition of Asset - SuMar Company purchased a new piece of machinery by paying $2,000 down and agreeing to pay $1,000 at the end of each year for 5 years. The appropriate interest rate is 8%.

Required -

1. What is the cost of the machinery? What is the present value of the liability at the time of the purchase?

2. Prepare the journal entry to record the purchase of the machinery and the associated liability on SuMar's balance sheet.

3. Prepare a table that shows the interest and ending balance of the liability each year. (Contributed by Norma C. Powell).

Reference no: EM132882980

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