Great Southwest Corporation, Inc. (GSC) was a real estate development company C8-2 headquartered in the southwestern United States, GSC was also engaged in con Great Southwest structing, developing, and operating amusement parks. On January 1, 1969 GSC sold Corporation (KR); its amusement park "Six Flags over Texas," which had been carried on the books of Valuing notes and GSC at a value of $22 million. GSC received a down payment of $2 million immedi recording interest ately and received a 35-year, 6.50% note for $35 million from the buyer. In addition, GSC immediately received another $3,412,500, representing prepayments of stated interest for the first three years. Beginning in 1972 payments of $2,137,500 (which in- clude interest payment of $1,137,500 and principal payment of $1,000,000) per year were to be made for the next 35 years. Since the average book value of the note is . $17.5 million (one half of $35 million), the annual stated interest payments were cal culated at 6,5% of $17,5 million. Assume that the company can justify recording the sale of the amusement park on January 1, 1969 when the contract was signed. Also, assume that all cash transactions took place on the first day of each year. GSC recorded the following journal entries to reflect the sale: DR Cash $ 2,000,000 DR Notes receivable 35,000,000 CR Amusement park in Dallas $22,000,000 CR Gain on sale 15,000,000 DR Cash 3,412,500 CR Unearned'interest revenue 3,412,500 REQUIRED: 1. Are these journal entries consistent with GAAP? If not, explain how GSC should have recorded the sale and the receipt of initial cash payments. Show all relevant calculations. 2. Assuming that the prevailing effective interest rate for comparable transactions is 10%, redo requirement (1). In addition, provide the necessary journal entries for the first four years of the note's life (i.e., 1969 to 1972) to record the interest rev- enue and the receipt of the periodic payments. Great Southwest Corporation, Inc. (GSC) was a real estate development company C8-2 headquartered in the southwestern United States, GSC was also engaged in con Great Southwest structing, developing, and operating amusement parks. On January 1, 1969 GSC sold Corporation (KR); its amusement park "Six Flags over Texas," which had been carried on the books of Valuing notes and GSC at a value of $22 million. GSC received a down payment of $2 million immedi recording interest ately and received a 35-year, 6.50% note for $35 million from the buyer. In addition, GSC immediately received another $3,412,500, representing prepayments of stated interest for the first three years. Beginning in 1972 payments of $2,137,500 (which in- clude interest payment of $1,137,500 and principal payment of $1,000,000) per year were to be made for the next 35 years. Since the average book value of the note is . $17.5 million (one half of $35 million), the annual stated interest payments were cal culated at 6,5% of $17,5 million. Assume that the company can justify recording the sale of the amusement park on January 1, 1969 when the contract was signed. Also, assume that all cash transactions took place on the first day of each year. GSC recorded the following journal entries to reflect the sale: DR Cash $ 2,000,000 DR Notes receivable 35,000,000 CR Amusement park in Dallas $22,000,000 CR Gain on sale 15,000,000 DR Cash 3,412,500 CR Unearned'interest revenue 3,412,500 REQUIRED: 1. Are these journal entries consistent with GAAP? If not, explain how GSC should have recorded the sale and the receipt of initial cash payments. Show all relevant calculations. 2. Assuming that the prevailing effective interest rate for comparable transactions is 10%, redo requirement (1). In addition, provide the necessary journal entries for the first four years of the note's life (i.e., 1969 to 1972) to record the interest rev- enue and the receipt of the periodic payments