E10-14 (Purchase of Equipment with Zero-Interest-BearingDebt) Sterling Inc. has

E10-14 (Purchase of Equipment with Zero-Interest-BearingDebt) Sterling Inc. has decided to purchase equipment fromCentral Michigan Industries on January 2 2012 to expand itsproduction capacity to meet customers demand for its product.Sterling issues a $900000 5-year zero-interest-bearing note toCentral Michigan for the new equipment when the prevailing marketrate of interest for obligations of this nature is 12%. The companywill pay off the note in five $180000 installments due at the endof each year over the life of the note.