On January 1, 2020, Jet Air Inc. contracted with Systems Plus Inc. to manufacture heavy equipment. Jet Air Inc. issued a $135,000 note to Systems Plus Inc. in exchange for the equipment that required 5% interest payments annually over 3 years on December 31 of each year. Although the fair value of the customized heavy equipment was not reasonably determinable, it was determined that 10% was a reasonable rate of interest for such a transaction. Provide journal entries to be made by Jet Air Inc. at each of the following dates. a. January 1, 2020 ---Date of note issuance. b. December 31, 2020 ---Date of interest payment. c. December 31, 2021 ---Date of interest payment. d. December 31, 2022 ---Date of interest payment. e. December 31, 2022 ---Date of note payment at maturity. Note: List multiple debits or credits (when applicable) in alphabetical order. Note: Round your answer to the nearest whole dollar. Note: Adjust interest expense in 2022 for any net rounding differences.

Jet Air Inc.

Journal Entries:

a. January 1, 2020 ---Date of note issuance:

Debit Equipment $135,000

Credit Note Payable $135,000

To record the cost of the heavy equipment exchanged with a note.

b. December 31, 2020 ---Date of interest payment:

Debit Interest Expense $6,750

Credit Cash $6,750

To record the interest expense for the first year.

c. December 31, 2021 ---Date of interest payment.

Debit Interest Expense $6,750

Credit Cash $6,750

To record the interest expense for the second year.

d. December 31, 2022 ---Date of interest payment.

Debit Interest Expense $6,750

Credit Cash $6,750

To record the interest expense for the third year.

e. December 31, 2022 ---Date of note payment at maturity.

Debit Note Payable $135,000

Credit Cash $135,000

To record the payment of the note at maturity.

Explanation:

Note Payable for the heavy equipment = $135,000

Reasonable rate of interest for the heavy equipment = 10%

Fair value of the heavy equipment = $148,500 ($135,00 * 1.10)

Discount obtained = $13,500 ($148,500 - $135,000)

Required interest = 5% annually = $6,750 ($135,000 * 5%)

if you use only 25 for your entertainment and only 200 for the groceries that you really need and take out the 50 per month for the computer then that should be enough