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Alden Trucking Company is replacing part of their fleet oftrucks by purchasing them under a note agreement with Kenworthy onJanuary 1, 2009. The note agreement will require $10 millionin annual payments starting on December 31, 2009 and continuing fora total of five years (final payment December 31,2013). Kenworthy will charge Alden the market interest rate of10% compounded annually. Round answers to the nearest tenth ofa million.

a) How much will Alden record as a debit to their equipmentaccount and as a credit to their notes payable account on January1, 2009?

b) How much of the first $10 million payment on December31, 2009 is interest?

c) What is the remaining obligation on January 1, 2010 after thefirst payment has been made?

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Accounting Basics, Accounting

Category:- Accounting Basics
Reference No.:- M9992628

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