Warbler Corporation entered into the following transactions.

Warbler purchased a computer on December $31,2024,$ for $$105,000,$ paying $$30,000$ down

and agreeing to pay the balance in five equal installments of $$15,000$ payable each December

$31$ beginning in $2025.$ An assumed interest rate of $10\%$ is implicit in the purchase price.

Warbler has negotiated the purchase of a new piece of automatic equipment on January $1,$

$2025,$ at a price of $$8,000$ plus trade$-$in$,$ f$.$o$.$b$.$ factory. Warbler paid $$8,000$ cash and traded in

used equipment. The used equipment had originally cost $$62,000$; it had a book value of

$$42,000$ and a secondhand fair value of $$47,800,$ as indicated by recent transactions involving

similar equipment. Freight and installation charges for the new equipment required a cash

payment of $$1,100.$

Instructions

a$.$ Prepare the journal entry $($entries$)$ for the computer at $(1)$ the date of purchase; $(2)$ at

December $31,2025,$ to record the payment and interest $($effective$-$interest method employed$)$;

and $(3)$ December $31,2026,$ to record the payment and interest $($effective$-$interest method

employed$).$

b$.$ Prepare the journal entry to record the new piece of automatic equipment, assuming that the

exchange has commercial substance.

c$.$ Assuming the same facts as in $($b$)$ except that fair value information for the assets exchanged

is not determinable, prepare the journal entry to record this transaction.$|$