Question 1: Pilsbury Co. bought machines on January 1, 2013. The company signed a note to pay $32,000 for the machines on December 31, 2014. The market interest rate is 10%. Record the journal entries for this transaction. Round to the nearest dollar.
Question 2: Gigler Co. bought some equipment on January 1, 2015. The company signed a note to pay for the equipment for two installments of $4,000 paid annually. The market interest rate is 6%. Record the journal entries for this transaction. Round to the nearest dollar.
Question 3: Kanodia Kanodia Co. leased some equipment on January 1, 2016. The company signed a 5-year lease for the equipment, whereby Kanodia must make annual payments of $2,000 at the end of each year. The market interest rate is 8%. The market value for the equipment is $8,900. Is this a capital lease or an operating lease? If it's a capital lease, record the initial entry; if it's an operating lease, record the year-end entry for the first year.