Question

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

1.		It sold land having a fair value of $913,050 in exchange for a 4-year zero-interest-bearing promissory note in the face amount of $1,436,698. The land is carried on Tamarisk's books at a cost of $592,800.
2.		It rendered services in exchange for a 3%, 8-year promissory note having a face value of $407,700 (interest payable annually).

Tamarisk 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 Tamarisk Inc. for the sales transactions above that took place on July 1, 2020.

Answer 1

The journal entry to record the sale of land will be prepare as follows:
Date	Account Titles	Debit	Credit
Jul. 1	Notes Receivable	1436698
	Land		592800
	Gain on Sale of Land ($913,050 - $592,800)		320250
	Discount on Notes Receivable ($1,436,698 - $913,050)		523648
The journal entry to record sale of services will be prepared as follows:
Date	Account Titles	Debit	Credit
Jul. 1	Notes Receivable	407700
	Discount on Notes Receivable		182278
	Service Revenue		225422