Shoes Inc. has the following transactions occurred during 2000:

1. The company borrowed $500,000 on January 1 to finance the purchase of new equipment. The terms for the company are a six month note, 10% interest bearing. Prepare a journal entry for the borrowing and repayment transactions. (4 marks)
2. SPI-W Inc. sales are poor in December due to the holidays and the company has decided this year to try to boost sales and offer discount on try-outs. Normal costs for a try-out is $5,000. The company has decided to offer the following incentive in which they can get two try-outs for the price of one if the customer pays $5,000 in advance. Prepare a journal entry for the customers prepayment of $5,000, and if the company did one try-out. (4 marks)
3. SPI-W Inc. is named in lawsuit. The attorney has written a letter to the company stating its extremely likely that SPI-W will lose the lawsuit and be forced to pay $125,000 in damages. Prepare the journal entry if necessary if not state, No. The account that would be used, if necessary is Lawsuits Payable. (2 marks)