Deferred Payment

The company purchased a piece of equipment. Terms of the purchase were as follows: $10,000 in cash immediately, followed by note payments of $20,000 at the end of each year for the next eight years. The market rate of interest is 9%.

1. Make the journal entry necessary to record the initial purchase. Round all answers to the nearest whole dollar. Click here to access the PV table to use with this problem. If an amount box does not require an entry, leave it blank.

2. Make the journal entries necessary to record the first cash payment of $20,000 at the end of the first year. Round your answers to the nearest whole dollar.