On January 1, Sheffield Corp. lent $32,000 to Sage Hill Inc., accepting Sage Hill's $42,592, three-year, zero-interest-bearing note. The implied interest is 10%.

(a)

Prepare Sheffield's journal entries for the initial transaction, recognition of interest each year assuming use of the effective interest method, and the collection of $42,592 at maturity.(Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.)

Account Titles and Explanation

Debit

Credit

enter an account title to record initial transaction

enter a debit amount

enter a credit amount

enter an account title to record initial transaction

enter a debit amount

enter a credit amount

(To record initial transaction)enter an account title to record interest income in the first year

enter a debit amount

enter a credit amount

enter an account title to record interest income in the first year

enter a debit amount

enter a credit amount

(To record interest income in the first year)enter an account title to record interest income in the second year

enter a debit amount

enter a credit amount

enter an account title to record interest income in the second year

enter a debit amount

enter a credit amount

(To record interest income in the second year)enter an account title to record interest income in the third year

enter a debit amount

enter a credit amount

enter an account title to record interest income in the third year

enter a debit amount

enter a credit amount

(To record interest income in the third year)enter an account title to record collection at maturity

enter a debit amount

enter a credit amount

enter an account title to record collection at maturity

enter a debit amount

enter a credit amount

(To record collection at maturity)