A specialized equipment were sold by Shanty Co. on January 1, 2010. The original cost of the equipment was $50,000 and, at the time of disposition, the book value was $40,000. By nature, the market value of the equipment was dificult to determine.
At the time of transaction, Shanty Co. received a $12,500 downpayment and a note, $25,000 face value, 5% interest, in four equal annual installments starting December 31, 2010. The market interest rate on notes on January 1, 2010 for a similar nature and risk was 10%.
Required
Prepare journal entries to record the disposal of the equipment on January 1, 2010, and the first interest received on December 31, 2010.
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