Notes receivable On January 1, 2010, the SomervilleCorporation sold a used truck to the Cornelius Company and accepteda $28,000 non-interest-bearing note due January 1, 2013. Somervillecarried the truck on its books at a cost of $30,000 and a currentbook value of $23,000. Neither the fair value of the truck nor thenote was available at the time of the sale; however,Cornelius's incremental borrowing rate was 12%.
1. Prepare the journal entries on Somerville's books torecord:
a. The sale of the truck
b. The related adjusting entries on December31, 2010, 2011, and 2012
c. The collection of the note on January 1,2013
2. Prepare the notes receivable portion of Somerville's December 31, 2010, 2011, and 2012 balance sheets.