Purchase of asset by non-interest-bearing note
Lebanon Corporation is a Calgary-based manufacturer of automobile parts. In early January 2020, the company acquired land and a building to be used as the company's new head office. Lebanon issued a $ 2M, five-year non-interest-bearing note to the seller. Payment is to be made in five equal instalments of $ 400,000 at the end of each year. As a result of a depressed real estate market, the fair value of the building cannot be readily determined. However, it has been ascertained that, given Lebanon's credit rating and market conditions, an interest rate of 9% would properly reflect the substance and credit risk of the negotiated payment schedule.
Other information:
1.One-third of the total value of the acquisition is attributable to the land.
2.The building is expected to have a useful life of 25 years.
3.Throughout the year, Lebanon incurred maintenance costs of $ 87,000 and paid them in cash.
4.A parking lot was built at a cost of $ 100,000 cash. The work was completed on July 1 and is expected to have a useful life of 10 years.
Instructions
Prepare all journal entries that are required to record the above events and transactions. Round all values to the nearest dollar.

Question

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The Answer of Purchase of asset by non-interest-bearing note
Lebanon Corporation is a Calgary-based manufacturer of automobile parts. In early January 2020, the company acquired land and a building to be used as the company's new head office. Lebanon issued a $ 2M, five-year non-interest-bearing note to the seller. Payment is to be made in five equal instalments of $ 400,000 at the end of each year. As a result of a depressed real estate market, the fair value of the building cannot be readily determined. However, it has been ascertained that, given Lebanon's credit rating and market conditions, an interest rate of 9% would properly reflect the substance and credit risk of the negotiated payment schedule.
Other information:
1.One-third of the total value of the acquisition is attributable to the land.
2.The building is expected to have a useful life of 25 years.
3.Throughout the year, Lebanon incurred maintenance costs of $ 87,000 and paid them in cash.
4.A parking lot was built at a cost of $ 100,000 cash. The work was completed on July 1 and is expected to have a useful life of 10 years.
Instructions
Prepare all journal entries that are required to record the above events and transactions. Round all values to the nearest dollar.

Purchase of Asset by Non-Interest-Bearing Note