Blue Inc. has decided to purchase equipment from Central industries on January 2, 2022, to expand its production capacity to meet customers' demand for its product. Blue issues a $810,000, 5-year, zero-interest-bearing note to Central for the newequipment when the prevailing market rate of interest for obligations of this nature is 11%. The company will pay off the note in five $162,000 installments due at the end of each year over the life of the note.
Blue Inc. has decided to purchase equipment from Central industries on January 2, 2022, to expand its production capacity to meet customers' demand for its product. Blue issues a $810,000, 5-year, zero-interest-bearing note to Central for the newequipment when the prevailing market rate of interest for obligations of this nature is 11%. The company will pay off the note in five $162,000 installments due at the end of each year over the life of the note.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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please do this correctly
Transcribed Image Text:Blue Inc. has decided to purchase equipment from Central industries on January 2, 2022, to expand its production capacity to meet
customers' demand for its product. Blue issues a $810,000, 5-year, zero-interest-bearing note to Central 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
$162,000 installments due at the end of each year over the life of the note.
(a)
Prepare the journal entry at the date of purchase. (Round factor values to 5 decimal places, eg. 1.25124 and final answers to O decimal
places, eg. 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 O for the amounts.)
Account Titles and Explanation
Debit
Credit
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