On December 31, 2020, Ed Abbey Co. performed environmental consulting services for Hayduke Co. Hayduke was short of cash, and Abbey Co. agreed to accept a $200,000 zero-interest-bearing note due December 31, 2022, as payment in full. Hayduke is somewhat of a credit risk and typically borrows funds at a rate of 10%. Abbey is much more creditworthy and has various lines of credit at 6%.
Instructions
a. Prepare the journal entry to record the transaction of December 31, 2020, for the Ed Abbey Co.
b. Assuming Ed Abbey Co.’s fiscal year-end is December 31, prepare the journal entry for December 31, 2021.
c. Assuming Ed Abbey Co.’s fiscal year-end is December 31, prepare the journal entry for December 31, 2022.
