On December 31, 2011, Debenham Corporation sold for $15,000 an old machine having an original...
Question:
On December 31, 2011, Debenham Corporation sold for $15,000 an old machine having an original cost of $84,000 and a book value of $9,000. The terms of the sale were as follows: $3,000 down payment, $6,000 payable on December 31 of the next two years. The sales agreement made no mention of interest; however, 10% would be a fair rate for this type of transaction.
Give the journal entries on Debenham s books to record the sale of the machine and receipt of the two subsequent payments. (Round to the nearest dollar.)
Down payment:
The amount paid from the total amount of an asset to reduce the interest rates for the future installments is referred to as a down payment. It varies from product to product and also depending on its cost. There are standards introduced on how to account for this expenditure.
Answer and Explanation: 1
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View this answerAs the machine is sold by receiving a down payment of a certain amount, the following entries must be passed to record those transactions:
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Cash Payments Journal: Definition & Example
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