Question

On October 1, 2020, Sage 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, $135,200, 8% note (a realistic rate of interest for a note of this type). The note required interest to be paid annually on October 1. Sage’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 Sage Equipment Company for the entire term of the note. Assume that reversing entries are not made on January 1, 2021 and January 1, 2022

Answer 1

Date	Particulars	Debit ($)	Credit ($)
October 1, 2020	Notes Receivable	135,200
	Sales Revenue		135,200
	(To record sales made & note received)
December 31, 2020	Interest Receivable [$135,200 * 8 %* 3 /12]	2,704
	Interest Revenue		2,704
	(To record interest on note receivable)
October 1, 2021	Cash [$135,200 * 8 %]	10,816
	Interest Receivable		2,704
	Interest Revenue		8,112
	[ To record receipt of interest on note]
December 31, 2021	Interest Receivable	2,704
	Interest Revenue		2,704
	(To record interest on note receivable)
October 1, 2022	Cash	10,816
	Interest Receivable		2,704
	Interest Revenue		8,112
	[ To record receipt of interest on note]
October 1, 2022	Cash	135,200
	Notes Receivable		135,200
	[ To record receipt of maturity value of note]

I hope it is useful to u if u have any doubt pls comment give me up thumb