On January 1, 2008 Touring company agreed to buy some equipment from Jones Company. Touring company signed a note,agreeing to pay Jones company $500,000 for the equipment on December 31, 2010. The market rate of interest for this note was 10%.
a. Prepare the journal entry Touring company would record on January 1, 2008 for the purchase.
b. Prepare the December 31, 2008 adjusting entry to record interest expense related to the note for the first year. Assume no adjusting entries have been made during the year.
C. prepare the December 31, 2009 adjusting entry to record interest expense related to the note for the second year, assume that no adjusting entries have been made during the year.
d. Prepare the entry Touring company would record on December 31, 2010, the due date of the note to record interest expense for the third year, and payment of the note. Assume that no adjusting entries have been made for the year.