On May 1, 2020, Sea Escape Ltd. purchases a new automobile for $18,000 from the dealer who provides the financing. The three-year, interest-free loan is repayable at $500 per month. The market rate of interest for similar transactions is 0.25% per month.
Required:
Prepare journal entries to record:
a. the purchase of the automobile.
b. the accrual of interest and the loan payment at the end of May 2020.

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The Answer of On May 1, 2020, Sea Escape Ltd. purchases a new automobile for $18,000 from the dealer who provides the financing. The three-year, interest-free loan is repayable at $500 per month. The market rate of interest for similar transactions is 0.25% per month.
Required:
Prepare journal entries to record:
a. the purchase of the automobile.
b. the accrual of interest and the loan payment at the end of May 2020.