On March 1, 2020, Parnevik Company sold goods to Goosen Inc. for $660,000 in exchange for a 5-year, zero-interest-bearing note in the face amount of $1,062,937 (an inputed rate of 10%). The goods have an inventory cost on Parnevik's books of $400,000. Required:
Prepare the journal entries for Parnevik on (a) March 1, 2020, and (b) December 31, 2020.

Parnevik Company

Journal Entries:

(a) March 1, 2020

Debit Notes Receivable (Goosen Inc.) $660,000

Credit Sales Revenue $660,000

To record the sale of goods in exchange for a 5-year, zero-interest-bearing note in the face amount of $1,062,937.

Debit Cost of Goods Sold $400,000

Credit Inventory $400,000

To record the cost of goods sold.

(b) December 31, 2020:

Debit Interest Receivable (Goosen Inc.) $55,000

Credit Interest Revenue $55,000

To record the interest receivable for 10 months on the note.

Explanation:

The sale of goods will be recorded net of the interest.  Interest Receivable from Goosen Inc. will be accumulated until when it is settled by Goosen Inc. at the end of the note's 5-year life.  By that time, the interest must have accumulated to $402,937 compounded yearly.

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