PART B: Long-term Note Receivable

On January 1, 2012, Jackson Corporation finished consultation services and accepted in exchange a note with a face value of $500,000, a due date of December 31, 2014, and a stated interest rate of 5%, with interest due at the end of each year beginning on December 31, 2012. The note has an effective rate of interest of 10%. Present value factors are provided below.

Factors for Three Periods 5% 10%

Present value of a single sum 0.86384 0.75132

Present value of an ordinary annuity 2.72325 2.48685

i. Prepare Jacksons journal entry to record the receipt of the note on January 1, 2012.

ii. Prepare Jacksons journal entry to record the receipt of interest on December 31, 2012.

iii. Determine the carrying value of the note receivable on December 31, 2013.