Teal Mountain Inc. lent $12,136 to Indigo Corporation, accepting Indigo's $12,500, three-month, zero-interest-bearing note. The implied interest is approximately 12%.

Prepare Teal Mountain's journal entries for the initial transaction and the collection of $12,500 at maturity.

Account Titles and Explanation Debit Credit

1.

2.

(To record initial transaction)

1.

2.

3.

(To record collection at maturity)