Recording Purchase of Equipment through Debt and Equity annual interest rate is typical of this transaction. The company uses the effective interest method to amortize any discount on note payable and the straight$-$line method to determine depreciation expense.

Required

a$.$ Prepare the entry to record the purchase on January $1$ of the current year.

b$.$ Prepare the entry on December $31$ of the current year to record $(1)$ interest expense and $(2)$ depreciation expense.

c$.$ Indicate what should be reported on the balance sheet related to this transaction as of December $31$ of the current year.

d$.$ Prepare the entry on December $31$ of the next year to record $(1)$ interest accrual $(2)$ cash payment, and $(3)$ depreciation expense. equipment.

Purchase of Equipment with Debt

Purchase of Equipment with Equity

Note: Round answers to the nearest whole number for the following questions.

a$.$ Prepare the entry to record the purchase on January $1$ of the current year.

$\backslash$table$[[$Account Name,Dr$.,$Cr$.],[$Jan$.1,$Equipment,$,37,070,0],[,$Discount on Note Payable,t$,6,330,0],[,$Cash,$,0,9,800],[,$Note Payable,$+{?}^{},0,33,600],[,$To record equipment purchase.,,,$]]$

b$.$ Prepare the entry on December $31$ of the current year to record $(1)$ interest expense and $(2)$ depreciation expense.

$\backslash$table$[[$Account Name,Dr$.,$Cr$.],[1.$ Dec. $31,$Interest Expense,$,2,999,0],[,$Discount on Note Payable,hat$(),0,2,999],[,$To record interest.,,,$]]$

$\backslash$table$[[$Account Name,Dr$.,$Cr$.],[2.$ Dec. $31,$Depreciation Expense,$,6,178,0],[,$Accumulated Depreciation,$,0,6,178],[,$To record depreciation.,,,$]]$

$\backslash$table$[[$Balance Sheet,Dec. $31,$ Year $1],[$Assets:$,,],[$Equipment$,$ net,$$,30,892$

Gardner Corporation manufactures skateboards and is in the process of preparing next year's budget. The pro

forma income statement for the currentryear is presented below.

For the coming year, the management of Gardner Corporation anticipates a $10$ percent increase in sales, a $12$

percent increase in variable costs, and a $$64,000$ increase in fixed costs.

The break$-$even point for next year $($rounded to the nearest dollar$)$ would be:

Note: Do not round intermediate calculations.