Problem:
On 1/1/14 we buy equipment and sign a 3-year note payable for $73,000. The market value is $73,000. Payments of $27,310 include both principal and interest and are to be made annually starting on 1/1/15. The present value of the payments is $73,000. The bank would require the purchaser to pay interest of 6% in order to borrow from them.
Required:
Question 1: Prepare the journal entry for 1/1/14
Question 2: Prepare the journal entry for 12/31/14
Question 3: Prepare the journal entry for 1/1/15
Question 4: Prepare the journal entry to record the issuance of the bonds on 1/1/14.
Question 5: Prepare the journal entry to record the issuance of the bonds on 12/31/14.
Question 6: Prepare the journal entry to record the issuance of the bonds on 1/1/15.
Note: Explain all steps comprehensively.