Answer:
Equipment 8,000 debit
Note Payable 8,000 credit
--to record signing of a note in exchange of equipment--
interest expense 40 debit
note payable 225 debit
cash 265 credit
--to record first payment
interest expense 38.88 debit
note payable 225 debit
cash 263.88 credit
--to record second payment
Explanation:
singing of the note:
we enter the equipment (assets) and the promissory note we signed (liability)
<u>at each payment:</u>
we calculate the carrying value times monthly rate to know interest
Then, we add the principal payment to know the total quota:
monthly rate: 6% annual divide by 12 months per year: 0.5% monthly rate
<em>first payment:</em>
8,000 x 0.005 = 40 interest expense
+ 225 principal amortization
265 cash disbursements
<em>second payment:</em>
carrying value: 8,000 - 225 amortization = 7,775
7,775 x 0.005 = 38.88
cash disbursment: 38.88 + 225 = 263.88