Create the journal entry at the date of purchase

Reference no: EM131896168

Problem

Kingbird Inc. has decided to purchase equipment from Central Michigan Industries on January 2, 2017, to expand its production capacity to meet customers' demand for its product. Kingbird issues a(n) $1, 056,000, 5-year, zero-interest-bearing note to Central Michigan for the new equipment when the prevailing market rate of interest for obligations of this nature is 11%. The company will pay off the note in five $211, 200 installments due at the end of each year over the life of the note.

Required: Prepare the journal entry at the date of purchase.

Reference no: EM131896168

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