Cobalt Ceramics, Inc., acquired a manufacturing facility (building) from Nickel Construction Company. Nickel completed construction of the facility on January 1, 2021. In payment for the $6 million lighthouse, Cobalt issued a five-year installment note to be paid in five equal payments at the end of each year. The payments include interest at the rate of 5.4%.

Instructions

1. Prepare the journal entry for Cobalts purchase of the facility on January 1, 2021.
2. Prepare the journal entry for the first installment payment on December 31, 2021.
3. Prepare the journal entry for the second installment payment on December 31, 2022.
4. What amount will Cobalt report as Notes Payable on its December 31, 2022 balance sheet?