Alden Trucking Company is replacing part of their fleet of trucks by purchasing them under a note agreement with Kenworthy on January 1, 2009. The note agreement will require $10 million in annual payments starting on December 31, 2009 and continuing for a total of five years (final payment December 31, 2013). Kenworthy will charge Alden Trucking Company the market interest rate of 10% compounded annually.
Required:
1. How much will Alden record as a debit to their equipment account and as acredit to their notes payable account on January 1, 2009?
2. How much ofthe first $10 million payment on December 31, 2009 isinterest?
3. What is theremaining obligation on January 1, 2010 after the first payment hasbeen made?
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