On January 1, 2021, Happy Tubs sold a hot tub to Monica, receiving a two-year, noninterest-bearing $80,000 note in exchange for a hot tub that normally sells for $68,000. The note is for an amount that achieves an effective interest rate of 5% per year, and Happy Tubs views the financing component of this transaction to be significant.

Required:

1. Prepare the journal entry to record the sale.

2. Prepare any adjusting entry necessary on December 31, 2021.

3. Prepare any adjusting entry necessary on December 31, 2022.