Recording Purchase of Equipment through Debt Relay Company purchases equipment by making a down payment of $28,000 cash. In addition, Relay signs a note requiring monthly payments of $5,600, starting one month after purchase and continuing for a total of 20 months. The contract calls for no interest, yet the prevailing interest rate is 12% on similar transactions. a. Record the entry required for the purchase of this equipment. b. Record the entry to recognize interest expense, one month after this purchase. Note: Round your answers to the nearest whole number. a. Account Name Dr. cr. 0 x 0 Equipment Discount on Note Payable 0 x 0 Cash 0 28,000 . Note Payable 0 0 x b. Account Name Dr. Cr. - 0 x O > Equipment Prepaid Insurance X X x 0 Computing and Recording Interest Capitalization Bullock Company is constructing a building for its own use and has been capitalizing interest based on average expenditures on a quarterly basis since the project began last year. The following expenditures are made during the first quarter: January 1, $560,000; February 1, $510,000; and March 31, $730,000. Bullock had the following debts outstanding during this quarter. Debt Amount Note payable, 10%, incurred specifically to finance construction $320,000 Short-term note payable, 15% 500,000 Mortgage note payable, 8% 240,000 Answer the following questions, rounding your answers to the nearest whole number. a. Compute interest to be capitalized and interest to be expensed for this first quarter. Amount of interest to be capitalized $ 0 x Amount of interest to expense $ DX b. Prepare the entry to record the construction expenditures and the interest. Note: Record the debit accounts in alphabetical order using the first letter of the account name. Account Name Dr. Cr. Building 0x Interest Expense OX Cash and Payables x Check