VIPSolutionsgive answer in 2 step with explanation at the end of each step and final answer at the end:[1 fines [fro [Mnerest Povable ———] I Tincome Summary] [N [Merchindie ventory | [Z [Common sock] Question: Su Company pcos dlr neh at $40000 pls is tres $30 $5000 coh 0 once the et 75% ea 56 cot my ooments the end of cn a. Questor Pode te ora hot mut be mde pcs ie pa VM el Questo: Comte he aur of ory py. — ps J Questo: rod ou sty for 2 mor pont Lal OR [Cc i) | = wa =
Question:
give answer in 2 step with explanation at the end of each step and final answer at the end:
[1 fines [fro
[Mnerest Povable ———] I Tincome Summary]
[N [Merchindie ventory | [Z [Common sock]
Question: Su Company pcos dlr neh at $40000 pls is tres
$30 $5000 coh 0 once the et 75% ea 56 cot my
ooments the end of cn a.
Questor Pode te ora hot mut be mde pcs ie
pa VM
el
Questo: Comte he aur of ory py.
—
ps J
Questo: rod ou sty for 2 mor pont
Lal OR [Cc i) |
= wa =
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Asked by: Aman Kori
Created at: 2025-10-15 01:35:46
Asked by: Aman Kori
Created at: 2025-10-15 01:35:46
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## Step 1: Journal Entry on Purchase Date
### **Explanation:**
- **Truck Cost:** $40,000
- **Sales Tax:** 8% of $40,000 = $3,200
- **Total Cost:** $40,000 + $3,200 = $43,200
- **Cash Paid:** $5,000
- **Amount Financed:** $43,200 - $5,000 = $38,200
**Journal Entry:**
- Debit: Delivery Truck (Asset) $43,200
- Credit: Cash $5,000
- Credit: Notes Payable $,200
---
## Step 2: Compute Monthly Payment
### **Explanation:**
The loan is $38,200, with a 3.75% annual interest rate, over 36 months.
Use the formula for an installment loan:
\[
PMT = \frac{P \times r}{1 - (1 + r)^{-n}}
\]
Where:
- \( P = \$38,200 \)
- \( r = \frac{3.75\%}{12} = .003125 \) per month
- \( n = 36 \) months
\[
PMT = \frac{38,200 \times .003125}{1 - (1 + .003125)^{-36}}
\]
\[
= \frac{119.375}{1 - (1.003125)^{-36}}
\]
\[
(1.003125)^{36} \approx 1.1185
\]
\[
(1.003125)^{-36} \approx .8938
\]
\[
1 - .8938 = .1062
\]
\[
PMT = \frac{119.375}{.1062} \approx \$1,124.22
\]
---
### **2nd Monthly Payment Journal Entry**
**Explanation:**
- Interest on 2nd payment:
1st month's principal after payment = $38,200 - (1st payment principal portion)
But for simplicity, let's break down the 2nd payment:
**First, calculate interest for 1st month:**
- 1st month interest: $38,200 × .003125 = $119.38
- Principal paid in 1st payment: $1,124.22 - $119.38 = $1,004.84
- Balance after 1st payment: $38,200 - $1,004.84 = $37,195.16
**2nd month interest:**
- $37,195.16 × .003125 = $116.23
- Principal paid in 2nd payment: $1,124.22 - $116.23 = $1,007.99
**Journal Entry:**
- Debit: Notes Payable $1,007.99
- Debit: Interest Expense $116.23
- Credit: Cash $1,124.22
---
## **Final Answers**
### **Purchase Date Journal Entry**
- **Debit:** Delivery Truck $43,200
- **Credit:** Cash $5,000
- **Credit:** Notes Payable $38,200
### **Monthly Payment Amount**
- **$1,124.22**
### **Second Monthly Payment Journal Entry**
- **Debit:** Notes Payable $1,007.99
- **Debit:** Interest Expense $116.23
- **Credit:** Cash $1,124.22
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