On January 1st 2007 a corporation purchased equipment. Because the company was short on cash, the agreed price of $50,000 would not be due until December 31st 2009. Since this delayed payment was essentially a loan by the seller, the company also agreed to pay interest each December 31st at a rate of 2% per annum. This was considered a good deal since interest rates in general at this time were around 14%.
Prepare journal entries which accounts get credited and debited for 1/1/2007, 21/31/2007, 12/31/2008 and 12/31/2009. Show your work. (You can ignore depreciation entries.)