Note Receivable in Installments
Response to the following problem:
On January 1, 2010, Tabor Company sold land with a book value of $50,000 to Wilson Company, accepting a $60,000 note, payable in three $20,000 annual installments beginning December 31, 2010. The note carried no stated interest rate and the fair values of the land and the note were not determinable. An appropriate interest rate for this note is 12%.
Required
Prepare the journal entries on Tabor Company's books to record:
1. The sale
2. The annual interest revenue and receipt of each $20,000 installment.