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 $3,600. The customer paid $600 cash and signed a three-year, $3,000 note that specified a stated rate of 3%. 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 10%