On December 31, 2019, Gray Company finished consulting services for a client and accepted in exchange a promissory note with a face value of $200,000, a due date of December 31, 2022, and a stated rate of 5%, with interest receivable at the end of each year. The fair value of the services cannot be readily determined and the note is not readily marketable. Under the circumstances, the note is considered to have an appropriate imputed rate of interest of 10%. A schedule of the note amortization follows:

Schedule of Note Discount Amortization (ignore rounding differences)

Cash Effective Discount Carrying

Date Interest Interest Amortized Value

12/31/19 $175,132

12/31/20 $ 10,000 $ 17,513 $ 7,513 182,645

12/31/21 10,000 18,265 8,265 190,910

12/31/22 10,000 19,090 9,090 200,000

$ 30,000 $ 54,868 $24,868

Prepare the following journal entries:

* Issuance of the note on 1/1/19

* Receipt of the second interest payment on 12/31/21

* Collection of the note on 12/31/22