Problem: On December 31, 2005 Ed Abbey Co performed environmental consulting services for Hayduke Co.
Hayduke was short of cash and Abbey Co agreed to accept a $200,000 zero interest bearing note due December 31, 2007, as payment in full. Hayduke is somewhat of a credit risk and typically borrows funds at a rate of 10%. Abbey is much more credit worthy and has various lines of credit at 6%.
A.) Prepare the journal entry to record the transaction of December 31, 2005, for the Ed Abbey Co.