Preparing Entries and Interest Schedule for Long$-$Term Note Receivable; Effective Interest Method

On January $1$ of Year $1,$ Stealth Company sold a machine $($classified as inventory$)$ that had a list price of $\backslash (\backslash$$ $21,600\backslash ).$ The customer paid $\backslash (\backslash$$ $3,600\backslash )$ cash and signed a three$-$year, $\backslash (\backslash$$ $18,000\backslash )$ note that speci $\backslash (3\backslash \%\backslash ).$ Annual interest on the full amount of the principal is payable each December $31.$ The principal is payable on December $31,$ three years later. The market rate for a note of this risk is $\backslash (10\backslash \%\backslash ).$

Required

a$.$ Compute the present value of this note.

b$.$ Prepare an effective interest schedule for this note.

c$.$ Prepare entries required by Stealth for this note on January $1$ of Year $1,$ and December $31$ of Year $1,$ Year $2,$ and Year $3.$

$-$ Note: Round answers to the nearest whole dollar.

a$.$ Present value of note: $\backslash (\backslash$$ $\backslash )0$

b$.$

C$.$ Homework $\backslash$#$7($Chapter $8)$

$\backslash$begin$\{$tabular$\}\{|$c$|$c$|$c$|$c$|\}$

$\backslash$hline Date & Account Name & Dr$.$ & Cr$.\backslash \backslash$

$\backslash$hline Jan. $1,$ Year $1$ & $\backslash (\backslash$checkmark $\backslash )$ & $0$ & $0\backslash \backslash$

$\backslash$hline & $\backslash (\backslash$checkmark $\backslash )$ & $0$ & $0\backslash \backslash$

$\backslash$hline & $\backslash (\backslash$checkmark $\backslash )$ & $0$ & $0\backslash \backslash$

$\backslash$hline & $\backslash (\backslash$checkmark $\backslash )$ & $0$ & $0\backslash \backslash$

$\backslash$hline & To record sale of equipment. & & $\backslash \backslash$

$\backslash$hline Dec. $31,$ Year $1$ & $\backslash (\backslash$checkmark $\backslash )$ & $0$ & $0\backslash \backslash$

$\backslash$hline & $\backslash (\backslash$checkmark $\backslash )$ & $0$ & $0\backslash \backslash$

$\backslash$hline & $\backslash (\backslash$checkmark $\backslash )$ & $0$ & $0\backslash \backslash$

$\backslash$hline & To record interest on note. & & $\backslash \backslash$

$\backslash$hline Dec. $31,$ Year $2$ & $\backslash (\backslash$checkmark $\backslash )$ & $0$ & $0\backslash \backslash$

$\backslash$hline & $\backslash (\backslash$checkmark $\backslash )$ & $0$ & $0\backslash \backslash$

$\backslash$hline & $\backslash (\backslash$checkmark $\backslash )$ & $0$ & $0\backslash \backslash$

$\backslash$hline & To record interest on note. & & $\backslash \backslash$

$\backslash$hline Dec. $31,$ Year $3$ & $\backslash (\backslash$checkmark $\backslash )$ & $0$ & $0\backslash \backslash$

$\backslash$hline & $\backslash (\backslash$checkmark $\backslash )$ & $0$ & $0\backslash \backslash$

$\backslash$hline & $\backslash (\backslash$checkmark $\backslash )$ & $0$ & $0\backslash \backslash$

$\backslash$hline & To record interest on note. & & $\backslash \backslash$

$\backslash$hline Dec. $31,$ Year $3$ & $\backslash (\backslash$checkmark $\backslash )$ & $0$ & $0\backslash \backslash$

$\backslash$hline & $\backslash (\backslash$checkmark $\backslash )$ & $0$ & $0\backslash \backslash$

$\backslash$hline & To record settlement of note. & & $\backslash \backslash$

$\backslash$hline

$\backslash$end$\{$tabular$\}$