Whispering Inc. has decided to purchase equipment from Central Michigan Industries on January

$2$

$,$

$2$

$0$

$2$

$5$

$,$

$$to expand its production

capacity to meet customers' demand for its product. Whispering issues an $

$1$

$,$

$2$

$8$

$0$

$,$

$0$

$0$

$0$

$,$

$5$

$-$

year, zero

$-$

interest

$-$

bearing note to Central

Michigan for the new equipment when the prevailing market rate of interest for obligations of this nature is

$1$

$2$

$\%$

$.$

$$The company will

pay off the note in five $

$2$

$5$

$6$

$,$

$0$

$0$

$0$

$$installments due at the end of each year over the life of the note.Prepare the journal entry at the end of the first year to record the payment and interest, assuming that the company employs the

effective

$-$

interest method.

$($

Round answers to

$0$

$$decimal places, e

$.$

g

$.$

$5$

$,$

$2$

$7$

$5$

$.$

$$Credit account titles are automatically indented when amount

is entered. Do not indent manually. If no entry is required, select

$"$

No Entry" for the account titles and enter

$0$

$$for the amounts. List all debit

entries before credit entries.

$)$

Account Titles and Explanation

Debit

Credit$($c$)$

Prepare the journal entry at the end of the second year to record the payment and interest. $($Round answers to $0$ decimal places, e$.$g$.$

$5,275.$ Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select $"$No

Entry" for the account titles and enter $0$ for the amounts. List all debit entries before credit entries.$)$

Account Titles and Explanation

Debit

Credit