Question

On October 1, 2017, Sheridan Equipment Company sold a pecan-harvesting machine to Valco Brothers Farm, Inc. In lieu of a cash payment Valco Brothers Farm gave Arden a 2-year, $171,200, 10% note (a realistic rate of interest for a note of this type). The note required interest to be paid annually on October 1. Sheridan’s financial statements are prepared on a calendar-year basis.

Assuming Valco Brothers Farm fulfills all the terms of the note, prepare the necessary journal entries for Sheridan Equipment Company for the entire term of the note. Assume that reversing entries are not made on January 1, 2018 and January 1, 2019. (Record journal entries in the order presented in the problem. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts. Credit account titles are automatically indented when the amount is entered. Do not indent manually.)

Date
Account Titles and Explanation
Debit
Credit

10/1/17
12/31/17
10/1/18
12/31/18
10/1/19

10/1/17
12/31/17
10/1/18
12/31/18
10/1/19

10/1/17
12/31/17
10/1/18
12/31/18
10/1/19

10/1/17
12/31/17
10/1/18
12/31/18
10/1/19

10/1/17
12/31/17
10/1/18
12/31/18
10/1/19
(To record the collection of interest)
(To record the collection of the note)

Answer 1

Date	Account Titles and Explanation	Debit	Credit
10/1/17	Note receivable	171200
	Sales revenue		171200
	(To record note receivable against sale)
12/31/17	Interest receivable	4280
	Interest revenue ($171200 x 10% x 3/12)		4280
	(To accrue interest on note receivable)
10/1/18	Cash	17120
	Interest receivable		4280
	Interest revenue ($171200 x 10% x 9/12)		12840
	(To record the collection of interest)
12/31/18	Interest receivable	4280
	Interest revenue ($171200 x 10% x 3/12)		4280
	(To accrue interest on note receivable)
10/1/19	Cash	17120
	Interest receivable		4280
	Interest revenue ($171200 x 10% x 9/12)		12840
	(To record the collection of interest)
10/1/19	Cash	171200
	Note receivable		171200
	(To record the collection of the note)