The company purchased a piece of equipment. Terms of the purchase were as follows: $10,000 in cash

Question:

The company purchased a piece of equipment. Terms of the purchase were as follows: $10,000 in cash immediately, followed by note payments of $20,000 at the end of each year for the next eight years. The market rate of interest is 9%. Make the journal entries necessary to record

(1) The initial purchase and

(2) The first cash payment of $20,000 at the end of the first year.