On January 2, 20x5, a company sold a large piece of equipment with a list price of

$200,000 (held in inventory to a customer) on the following terms: blended annual

payments of interest and principal starting December 31, 20x5 and ending on December

31, 20x8. The interest rate charged by the note is 3%.

The companys incremental borrowing rate is 4% 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, 20x5 payment to Revenue. No entry was made

to the Note Receivable account.

Required Prepare the adjusting journal entries required as at December 31, 20x5.