Question

On October 1, 2020, Pearl Equipment Company sold a pecan-harvesting machine to Valco Brothers Farm, Inc. In lieu of a cash payment Valco Brothers Farm gave Arden a 2-year, $171,200, 10% note (a realistic rate of interest for a note of this type). The note required interest to be paid annually on October 1. Pearl’s financial statements are prepared on a calendar-year basis.

Assuming Valco Brothers Farm fulfills all the terms of the note, prepare the necessary journal entries for Pearl Equipment Company for the entire term of the note. Assume that reversing entries are not made on January 1, 2021 and January 1, 2022. (Record journal entries in the order presented in the problem. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts. Credit account titles are automatically indented when the amount is entered. Do not indent manually.)

Date	Account Titles and Explanation	Debit	Credit
10/1/2012/31/2010/1/2112/31/2110/1/22
10/1/2012/31/2010/1/2112/31/2110/1/22
10/1/2012/31/2010/1/2112/31/2110/1/22
10/1/2012/31/2010/1/2112/31/2110/1/22
10/1/2012/31/2010/1/2112/31/2110/1/22
	(To record the collection of interest)
	(To record the collection of the note)

show work and explain

Answer 1

Answer
Journal Entries
Date	Partculars	Debit($)	Credit ($)
October 1, 2020	Notes Receivable	171,200
	Sales Revenue		$171,200
	( To record sales made & note received)
December 31, 2020	Interest Receivable [$171200 * 10 %* 3 /12]	$     4,280
	Interest Revenue		$    4,280
	( To record interest on note receivable)
October 1, 2021	Cash [$171200 * 10 %]	$   17,120
	Interest Receivable		$    4,280
	Interest Revenue		$ 12,840
	[ To record receipt of interest on note]
December 31, 2021	Interest Receivable	$     4,280
	Interest Revenue		$    4,280
	(To record interest on note receivable)
October 1, 2022	Cash	$   17,120
	Interest Receivable		$    4,280
	Interest Revenue		$ 12,840
	[ To record receipt of interest on note]
October 1, 2022	Cash	$ 171,200
	Notes Receivable		$171,200
	[ To record receipt of maturity value of note]