Notes Payable

On January 1, 2011 an entity acquired an equipment for 2,000,000 payable in 5 equal annual instalments on every December 31, of each year. The prevailing market interest rate is 10%. The table of present value shows that the present value factor of an annuity of 1 for 5 years at 10% is 3.7908. Prepare the entries for 2011 and 2012 and show the necessary solutions.