On December 31, 2019, Tangerine Corp. sold product to Orange Limited, accepting a 3%, four-year promissory note of $400,000 in exchange. Interest is payable annually on December 31, starting December 31, 2020. Tangerine Corp. normally pays 6% interest to borrow funds. Orange Limited, however, normally pays 8% to borrow funds. The product sold is carried on Tangerine's books at a manufactured cost of $255,000. Assume Tangerine uses the perpetual inventory system.

Instructions

On Tangerine's books:

a. do the required journal entries to record the transaction at December 31, 2019. Assume that the effective interest method is used. Use the interest tables on the following page (if needed) and round all values to the nearest dollar.

b. all appropriate entries for 2020 in relation to this note.

c. all appropriate entries for 2021 in relation to this note.