Omega Chemicals Limited took a $420,000 two-year note receivable from a customer in connection with a major sale transaction on 1 May 207. The note required annual 31 April interest payments of 3%, and the principal was due on 31 April 209. Omega has a 31 December year-end.

Required:

1. Prepare journal entries to record the initial sale transaction and each payment on the books of Omega, assuming that the market interest rate is 3%.
2. Assume now that the market interest rate is 5%. Calculate the present value of the note, and prepare a schedule that shows the interest for each year of the note receivable.
3. Prepare journal entries to record the initial sale transaction and each payment on the books of Omega, consistent with requirement 2. Use the gross method to record the note.
4. What accounts are different between requirements 1 and 3? Explain.