Chen Inc. accepted a two-year noninterest-bearing note for $605,000 on January 1, 2021. The note was accepted as payment for merchandise with a fair value of $500,000. The effective interest rate is 10%. What is the correct entry to record the note?

Multiple Choice

• Notes receivable	605,000
  Interest revenue		105,000
  Cost of sales		500,000

• Notes receivable	605,000
  Accounts receivable		605,000

  Incorrect

• Notes receivable	500,000
  Accounts receivable		500,000

• Notes receivable	605,000
  Discount on notes receivable		105,000
  Sales revenue		500,000