On January 1, 1987 ABC Co. purchased a machine. Because the company was short of cash, the agreed price of $50,000 would not be due until December 31, 1989. However, since this delayed payment was in essence a loan by the seller, ABC Co. also agreed to pay interest each December 31 at a rate of 2% per annum. This was considered a very good deal since interest rates in general at that time were around 14%.

REQUIRED
Prepare journal entries for 1/1/87, 12/31/87, 12/31/88, and 12/31/89. Ignore the depreciation entries.