Innovative Company manufactures and sells electrical generators.

On January 1, 2019, the entity sold

an electrical generator bearing note payable in three equal installments every December 31.
The buyer paid Php100,000 down and signed Php900,000 noninterest bearing note payable in three
equal installments every December 31.
The prevailing interest rate for a note of this type is 12%. The present value of an ordinary annuity of 1
for three periods is 2.4018.
Required: Prepare journal entries for the current year.
Journal Entries
Date Account Titles Debit Credit
2019
Jan 1 Cash 100,000
Notes Receivable 900,000
Sales 820,549
Unearned Interest Income 179,451

Face Value of note 900,000

Less: PV of note (300,000 x 2.401831268) (720,549)
179,451

Date Collection Interest Principal PV

01-01-2019 720,549
12-31-2019 300,000 86,466 213,534 507,015
12-31-2020 300,000 60,842 239,158 267,857
12-31-2021 300,000 32,142 267,857 -----

Cash 300,000
Notes Receivable 300,000
#
Unearned Interest Income 86,466
Interest Income 86,466

Partial Balance Sheet

December 31, 2019
Current Assets:
Trade and Other Receivables
Notes Receivable 300,000
Less: Unearned Interest Income (60,842) 239,158

Non-Current Assets:
Other Non-Current Assets
Notes Receivable 300,000
Less: Unearned Interest Income (32,143) 168,767