On January 1, 2007, the Fritz Company sold a building in a depressed area for $200,000. The building had originally cost $500,000 and had a book value of $100,000. The sale agreement required the purchaser to pay $5,000 down and sign an 8% note for the balance. Interest on the note is payable at the end of each year; the interest is refundable if the following contingency is not met. The sale agreement is contingent on the commitment by the city government to support redevelopment of the area in which the building is located. Therefore, the company used the deposit method to record the sale.
Required
1. Prepare the journal entries for 2007.
2. On January 1, 2008 the city government made the necessary commitments. Prepare the appropriate journal entry.