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Prepare the journal entry at the date of purchase

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Problem 1: Prepare the journal entry at the date of purchase.

Pina Inc. has decided to purchase equipment from Central Michigan Industries on January 2, 2020, to expand its production capacity to meet customers' demand for its product. Pina issues a(n) $560,000, 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 12%. The company will pay off the note in five $112,000 installments due at the end of each year over the life of the note.

Reference no: EM132789356

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