On July 1, 2020, Bramble Inc. made two sales. 1. It sold land having a fair value of $905,820 in exchange for a 4-year zero-interest-bearing promissory note in the face amount of $1,425,321. The land is carried on Ayayai's books at a cost of $599,100.
2. It rendered services in exchange for a 3%, 8-year promissory note having a face value of $409,970 (interest payable annually). Ayayai 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.

Required:
Record the two journal entries that should be recorded by Bramble Inc. for the sales transactions above that took place on July 1, 2020.

Bramble Inc.

Journal Entries:

July 1, 2020:

1.

Debit Long-term Note Receivable $1,425,321

Credit Land $599,100

Credit Interest Receivable $519,501

Credit Gain from Sale of Land $306,720

To record the sale of land for a 4-year zero-interest-bearing note.

2.

Debit Long-term Note Receivable $409,970

Credit Service Revenue $323,634

Credit Interest Receivable $86,336

To record the rendering of services in exchange for a 3%, 8-year note.

Explanation:

a) Data and Analysis:

1. Long-term Note Receivable $1,425,321

Land $599,100

Interest Receivable $519,501 ($1,425,321 - $905,820)

Gain from Sale of Land $306,720 ($905,820 - $599,100)

2. Long-term Note Receivable $409,970

Service Revenue $323,634

Interest Receivable $86,336

NB: The interest receivable and the present value of the service revenue for 2 were obtained from an online financial calculator, using the future value of $409,970 and 3% interest rate for 8 years.

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