Purchase on Deferred Payment Contract
Hi Tech Industries purchases new electronic equipment for its telecommunication system. The contractual arrangement specifies 10 payments of $8,600 each to be made over a 10 year period. If Hi Tech had borrowed money to buy the equipment, it would have paid interest at 9%. Hi Tech’s accountant recorded the purchase as follows:
|
Equipment |
86,000 |
|
|
Notes Payable |
|
86,000 |
Prepare the correcting acquisition entry, considering the implicit interest in the purchase.