Watt Service Inc. completed a major renovation contract and billed the customer $56,000 on January 1, 2020. Cash of $16,000 was collected, and a 5% note was received for the remaining $40,000, payable in three equal annual installments (including principal plus interest) each December 31 of 2020, 2021, and 2022. The market rate of interest for notes with comparable risk is 12%.
Required a. Compute the amount of each of the three annual payments on the note. b. Compute the present value of the note at January 1, 2020. C. Prepare an effective interest schedule for the note. d. Prepare the journal entries required as of the following dates. Record the note receivable net of discount. 1. January 1,2020 2. December 31,2020 3. December 31, 2021 4. December 31, 2022