Legendary Corporation purchased equipment and in exchange signed a three- year promissory note. The note requires Legendary to make equal annual payments of $ 10,000 at the end of each of the next three years. Legendary has other promissory notes that charge interest at the annual rate of 6 percent.
Required:
1. Compute the present value of the note, rounded to the nearest dollar, using Legendary’s typical interest rate of 6 percent.
2. Show the journal entry to record the equipment purchase (round to the nearest dollar).
3. Show the journal entry at the end of the first year to record the first payment of $10,000.
4. Show the journal entry at the end of the second year to record the second payment of $10,000.
5. Show the journal entry at the end of the third year to record the third payment of $10,000.