Zavala Drilling Co. purchased machinery on January 1, 2023. The machinery was valued at $3,400,000, with a $850,000 down payment and Zavala agreed to pay the balance in six equal installments payable at the end of the fiscal year, on December 31. An assumed interest of 8% is implicit in the purchase price.

1.Calculate the annual payments for this note.

2. Prepare the journal entries required from 2023 through 2024 for the purchase, interest and payments. Round amounts to the nearest dollar.

3.Now assume that the machinery was purchased on February 28, 2023, with the first payment due on February 28, 2023 (with $0 down payment required). Payments are due semi-annually, February 28 and August 31 of each year. Prepare the journal entries required from 2023 through 2024 for the purchase, interest and payments. Round amounts to the nearest dollar.