On January 1, 2010, the Somerville Corporation sold a used truck to the Cornelius Company and accepted a $28,000 non interest bearing note due January 1, 2013. Somerville carried the truck on its books at a cost of $30,000 and a current book value of $23,000. Neither the fair value of the truck nor the note was available at the time of the sale; however, Cornelius's incremental borrowing rate was 12%.
Required:
1. Prepare the journal entries on Somerville's books to record:
a. The sale of the truckb. The related adjusting entries on December 31, 2010, 2011, and 2012c. The collection of the note on January 1, 2013
2. Prepare the notes receivable portion of Somerville's December 31, 2010, 2011, and 2012 balance sheets.