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On July 1, 2020, Indigo Inc. made two sales. 1. It sold land having a fair value of $905,820 in exchange for a 4-year zero-interest-bearing

On July 1, 2020, Indigo Inc. made two sales.

1. It sold land having a fair value of $905,820 in exchange for a 4-year zero-interest-bearing promissory note in the face amount of $1,425,321. The land is carried on Indigo's books at a cost of $599,100.
2. It rendered services in exchange for a 3%, 8-year promissory note having a face value of $409,970 (interest payable annually).

Indigo Inc. recently had to pay 8% interest for money that it borrowed from British National Bank. The customers in these two transactions have credit ratings that require them to borrow money at 12% interest. Record the two journal entries that should be recorded by Indigo Inc. for the sales transactions above that took place on July 1, 2020.

No.

Date

Account Titles and Explanation

Debit

Credit

1.

July 1, 2020

Notes receivable

land

discount on notes receivable

gain on disposable land

2.

July 1, 2020

notes receivable

service revenue

discounts on notes receivable

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