On January 1, 2011, Denver Company sold land that originally cost $400,000 to Boise Company. As payment, Boise gave Denver a $600,000 note. The note bears an interest rate of 4% and is to be repaid in three annual installments of $200,000 (plus interest on the outstanding balance). The first payment is due on December 31, 2011. The market price of the land is not reliably determinable. The prevailing rate of interest for notes of this type is 14%.

Instructions:

Prepare the entries required on Denver’s books to record the land sale and the receipt of each of the three payments. Use the effective-interest method of amortizing any premium or discount on the note.