Recording Entries for Long-Term Note Receivable; Effective-Interest Method

On January 1, 2020, Jacobs Company sells land financed through a $32,000 note, issued by Andress Company. The note is a $32,000, 9%, annual interest-bearing note. Andress agrees to repay the $32,000 proceeds on December 31, 2021. The prevailing interest rate on similar notes is 11%. Assume that the cost of the land is equal to the fair value of the note.

Required

Prepare all entries for Jacobs over the note term, including any year-end adjustments. Use the effective interest method to amortize the discount.

X X Recording Entries for Long-Term Note Receivable; Effective Interest Method On January 1, 2020, Jacobs Company sells land financed through a $32,000 note, issued by Andress Company. The note is a $32,000, 9%, annual interest-bearing note. Andress agrees to repay the $32,000 proceeds on December 31, 2021. The prevailing interest rate on similar notes is 11%, Assume that the cost of the land is equal to the fair value of the note. Required Prepare all entries for Jacobs over the note term, including any year-end adjustments. Use the effective interest method to amortize the discount. Date Account Name Dr. Cr Jan 1, 2020 Note Receivable 32,000 0 Discount on Note Receivable Land Dec. 31, 2020 Cash 2,880 Discount on Note Receivable Inter Interest Revenue Dec 31, 2021 Cash 2,880 Discount on Note Receivable Interest Revenue To record interest an note Dec 31, 2021 Cash 32,000 Note Receivable 32,000 To record settlement of note x 0 X X X Check