On 1 July 2013 Bigwell Plc Sells a Machine to Archer

Multiple Choice

On 1 July 2013 Bigwell Plc sells a machine to Archer Plc in exchange for a promissory note that requires Archer Plc to make five payments of €8000,the first to be made on 30 June 2014.The machine cost Bigwell Plc €20 000 to manufacture.Bigwell Plc would normally sell this type of machine for €30 326 for cash or short-term credit.The implicit interest rate in the agreement is 10%.What are the appropriate journal entries to record the sale agreement and the first two instalments using the gross method?

A) $$\begin{array}{l}1 \text { July } 2013\\\begin{array} { | c | l | r | r | } \hline \mathrm { Dr } & \text { Note receivable } & 40000 & \\\hline \mathrm { Cr } & \text { Sales } & & 40000 \\\hline & & & \\\hline \mathrm { Dr } & \text { Cost of sales } & 20000 & \\\hline \mathrm { Cr } & \text { Inventory } & & 20000 \\\hline & & & \\\hline 30 \text { June } 2014 & & \\\hline \mathrm { Dr } & \text { Cash } & 8000 & \\\hline \mathrm { Cr } & \text { Note receivable } & & 8000 \\\hline & & & \\\hline \mathrm { Dr } & \text { Note receivable } & 3033 & \\\hline \mathrm { Cr } & \text { Interest revenue } & & 3033 \\\hline & & & \\\hline 30 \text { June } 2015 & & \\\hline \mathrm { Dr } & \text { Cash } & 8000 & \\\hline \mathrm { Cr } & \text { Note receivable } & & 8000 \\\hline & & & \\\hline \mathrm { Dr } & \text { Note receivable } & 2536 & \\\hline \mathrm { Cr } & \text { Interest revenue } & & 2536 \\\hline\end{array}\end{array}$$
B) $\begin{array}{l}1 \text { July } 2013\\\begin{array}{|l|l|r|r|}\hline \mathrm{Dr} & \text { Note receivable } & 40000 & \\\hline \mathrm{Cr} & \text { Sales } & & 30326 \\\hline \mathrm{Cr} & \text { Unearned revenue } & & 9674 \\\hline\\\hline\mathrm{Dr} & \text { Cost of sales } & 20000 & \\\hline \mathrm{Cr} & \text { Inventory } & & 20000\\\hline\\\hline 30 \text { June } 2014 & & \\\hline \mathrm{Dr} & \text { Cash } & 8000 & \\\hline \mathrm{Cr} & \text { Note receivable } & & 8000 \\\hline\\\hline \mathrm{Dr} & \text { Interest revenue } & 4000 & \\\hline \mathrm{Cr} & \text { Unearned revenue } & & 4000 \\\hline\\30 \text { June } 2015 & & \\\hline \mathrm{Dr} & \text { Cash } & 8000& \\\hline \mathrm{Cr} & \text { Note receivable } & &8000 \\\hline & & & \\\hline \mathrm{Dr} & \text { Interest revenue } & 3600& \\\hline \mathrm{Cr} & \text { Unearned revenue } & & 3600 \\\hline\end{array}\end{array}$
C) $\begin{array}{l}1 \text { July } 2013\\\begin{array}{|l|l|r|r|}\hline \mathrm{Dr} & \text { Note receivable } & 40000 & \\\hline \mathrm{Cr} & \text { Sales } & & 30326 \\\hline \mathrm{Cr} & \text { Unearned revenue } & & 9674 \\\hline\\\hline \mathrm{Dr} & \text { Cost of sales } & 20000 & \\\hline \mathrm{Cr} & \text { Inventory } & & 20000 \\\hline\\\hline 30 & \text { June } 2014 & & \\\hline \mathrm{Dr} & \text { Cash } & & \\\hline \mathrm{Cr} & \text { Note receivable } & & 8000 \\\hline & & & \\\hline \mathrm{Dr} & \text { Unearned revenue } & 3033 & \\\hline \mathrm{Cr} & \text { Interest revenue } & & 3033 \\\hline\\\hline30 \text { June } 2015 & & \\ \hline \mathrm{Dr} & \text { Cash } & 8000& \\\hline \mathrm{Cr} & \text { Note receivable } & &8000 \\\hline & & & \\\hline \mathrm{Dr} & \text { Unearned revenue } & 2536 & \\\hline \mathrm{Cr} & \text { Interest revenue } && 2536 \\\hline\end{array}\end{array}$

D) $\begin{array}{l}1 \text { July } 2013\\\begin{array}{|c|l|r|r|}\hline \mathrm{Dr} & \text { Note receivable } & 30326 & \\\hline \mathrm{Cr} & \text { Sales } & & 30326 \\\hline & & & \\\hline \mathrm{Dr} & \text { Cost of sales } & 20000 & \\\hline \mathrm{Cr} & \text { Inventory } & & 20000 \\\hline\\\hline 30 \text { June } 2014 & & \\\hline \mathrm{Dr} & \text { Cash } & 8000 & \\\hline \mathrm{Cr} & \text { Note receivable } & & 4967 \\\hline \mathrm{Cr} & \text { Interest revenue } & & 3033 \\\hline\\\hline 30 & \text { June } 2015 & & \\\hline \mathrm{Dr} & \text { Cash } & 8000 & \\\hline \mathrm{Cr} & \text { Note receivable } & & 4497 \\\hline \mathrm{Cr} & \text { Interest revenue } & & 3503 \\\hline \end{array}\end{array}$