Cardinals Corporation purchased a computer on December 31, 2013, for $274,365, paying $78,390 down and agreeing to pay the balance in five equal installments of $39,195 payable each December 31 beginning in 2014. An assumed interest rate of 8% is implicit in the purchase price.

Prepare the journal entry at the date of purchase.

Date              Account Titles                                              Debit      Credit

12/31/13

                    Equipment

                    Discount on Notes Payable

                    Notes Payable

                    Cash

Prepare the journal entry at December 31, 2014, to record the payment and interest (effective interest method employed).

Date                      Account Titles                                 Debit      Credit

12/31/14

                          Interest Expense

                          Notes Payable

                          Cash

                          Discounts on Notes Payable

Prepare the journal entry at December 31, 2015, to record the payment and interest (effective interest method employed).

Date                       Account Titles                             Debit      Credit

12/31/15

                          Interest Expense

                          Notes Payable

                          Cash

                          Discounts on Notes Payable