Wheel Company Purchased an Asset That Cost $70,000 on January

Essay

Wheel Company purchased an asset that cost $70,000 on January 1, 20X1. Arrangements were made with the supplier to pay $10,000 cash on January 1, 20X1, and the balance was to be paid over a three-year period, with equal annual payments of $24,553 to be made at the end of 20X1, 20X2, and 20X3. Each payment will include principal plus interest on the unpaid balance at 11% per year.
A. Complete the following table. $$\begin{array} { | l | l | l | l | l | } \hline \text { Date } & \text { Payment } & \text { Interest Expense } & \begin{array} { l } \text { Reduction in } \\\text { Principal }\end{array} & \text { Unpaid Principal } \\\hline 01 / 01 / 20 X 1 & & & & \\\hline 12 / 31 / 20X 1 & & & & \\\hline 12 / 31 / 20 X 2 & & & & \\\hline 12 / 31 / 20 X 3 & & & & \\\hline \text { Totals } & & & & \\\hline\end{array}$$ * Round to reduce principal to zero.
B. Give the entry for the payment on December 31, 20X2
C. On the debt payment schedule, what is the trend of amounts for interest expense and principal reduction over time? Explain your response.