On January 1, 2007, LuthorCorp sold inventory costing $40,000 to OsCorp. In return, LuthorCorp received a 4-year, 8% note with a face value of $100,000. Blended payments will be made yearly on December 31, and will include principal and interest. The market rate of interest is 2%. LuthorCorp has a December 31 year-end while OsCorp's year-end is October 31.

Instructions:

a) Calculate the annual payments LuthorCorp will receive each year from OsCorp. Use the stated rate of the note in your calculation.

Annual Payment

= $

b) Complete the following payment and amortization schedule for the note, except for where there is "keep blank" written. (Also please make sure to include 2 decimal places for all the answers for b).

	Cash Received	Interest Revenue (2%)	Principal Reduction	Carrying Value of Note
Jan. 1, 2007	Keep blank	Keep blank	Keep blank
Dec. 31, 2007
Dec. 31, 2008
Dec. 31, 2009
Dec. 31, 2010

c) Record the journal entries for LuthorCorp on January 1, 2007 and December 31, 2007.