On January 2, 20x3, a company sold a large piece of machinery with a list price of $500,000 (held in inventory to a customer) on the following terms: blended annual payments of interest and principal starting December 31, 20x3 and ending on December 31, 20x7. The interest rate charged by the note is 4%.

The companys incremental borrowing rate is 6% and the customer who purchased the equipments incremental borrowing rate is 8%. The bookkeeper was unsure on how to handle this and credited the December 31, 20x3 payment to Revenue. No entry was made to the Note Receivable account.

Required Prepare the adjusting journal entries required as at December 31, 20x3.