On January 1, 2016, Worthylake Company sold used machinery to Brown Company, accepting a $25,000, non-interest-bearing note maturing on January 1, 2018. Worthylake carried the machinery on its books at a cost of $22,000 and a current book value of $15,000. Neither the fair value of the machinery nor the note was determinable at the time of sale; however, Browns incremental borrowing rate was 12%.

Required:

Prepare the journal entries on Worthylakes books to record:

1.	sale of the machinery
2.	related adjusting entries on December 31, 2016, and 2017
3.	payment of the note by Brown on January 1, 2018