1. On December 15th, a note payable is used to replace a $10,000 overdue account payable that does not bear interest. The customer agrees to pay $3,000 cash and sign a 90-day, 15% note to replace the account payable.

The customers entry to record the interest on Dec31st would be:

Interest Expense Debit, Interest Payable Credit

Interest Expense Debit, Interest Income Credit

Interest Payable Debit, Interest Income Credit

Interest Expense Debit, Interest Receivable Credit

2. Plant was purchased on April 21st, 2018 for $ 250,000 with a residual value of $50,000 and useful life of 15 years. Depreciation is charged on straight-line basis. The company year end date is December 31st.

On July 3rd 2020, the Plant was sold for $ 150,000.

The gain/ loss on sale was:

$ 71,111.11

$ 73,333.33

$70,000

$ 69,666.66