On October 1, 2017, Novak Corp., a farm equipment dealer, sold a harvesting machine to Sweet Acacia Industries. Instead of a cash payment, Sweet Acacia Industries gave Novak a $130,000, two-year, 12% note; 12% is a realistic rate for a note of this type. The note required interest to be paid annually on October 1, beginning October 1, 2018. Novaks financial statements are prepared on a calendar-year basis.

A) Assuming that no reversing entries are used and that Sweet Acacia Industries fulfills all the terms of the note, prepare the necessary journal entries for Novak Corp. for the entire term of the note.

B) Repeat the journal entries under the assumption that Novak Corp. uses reversing entries.