Reference no: EM132626600

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) $1,680,000, 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 $336,000 installments due at the end of each year over the life of the note.

Problem 1: Prepare the journal entry at the end of the second year to record the payment and interest. (Round answers to 0 decimal places, e.g. 5,275. Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.)

Account Titles and Explanation              Debit                 Credit

Interest Expense                                  127,903

Notes Payable                                       336,000

Discount on Notes Payable                                               127,903

cash                                                                                 336,000