Use the following illustration to answer questions 11-13: On January 1, 2020 Fast Electronics Co. purchases equipment by issuing a 6%, 5-year promissory note having a maturity value of $300,000 (interest is paid annually). The market rate for the note is 8%.

1. What is the journal entry recorded for the purchase of the equipment?
   1. Debit- equipment $276,044, Credit- notes payable $276,044
   2. Debit- equipment $276,044, discount on note $23,956, Credit- notes payable $300,000
   3. Debit- equipment $300,000, Credit- notes payable $300,000
   4. Debit- equipment $300,000, Credit- notes payable $276,044, premium on note $23,956

2. What is the amount of interest expense calculated for December 31, 2020?
   1. $18,000
   2. $24,000
   3. $22,080
   4. $16,563

3. What accounts are debited and credited to record interest expense on December 31, 2020?
   1. Debit- Interest Expense, Credit- Interest Payable, Discount on Notes Payable
   2. Debit- Interest Payable, Credit- Interest Expense
   3. Debit- Interest Expense, Discount on Notes Payable, Credit- Interest Payable
   4. Debit- Interest Expense, Credit- Interest Payable, Premium on Notes Payable