Chen Inc Accepted a Two-Year Noninterest-Bearing Note for $605,000 on January

Chen Inc. accepted a two-year noninterest-bearing note for $605,000 on January 1, 2018. The note was accepted as payment for merchandise with a fair value of $500,000. The effective interest rate is 10%. What is the correct entry to record the note?

A) $\begin{array}{|c|c|c|}\hline \text { Note receivable } & 605,000 & \\\hline \text { Accounts receivable } & & 605,000 \\\hline\end{array}$
B) $\begin{array}{|c|c|c|}\hline \text { Note receivable } & 500,000 & \\\hline \text { Accounts receivable } & & 500,000 \\\hline\end{array}$
C) $\begin{array}{|l|l|l|}\hline \text { Note receivable } & 605,000 & \\\hline \text { Discount on note receivable } & & 105,000 \\\hline \text { Sales revenue } & & 500,000 \\\hline\end{array}$
D) $\begin{array}{|c|c|c|}\hline \text { Note receivable } & 605,000 & \\\hline \text { Interest revenue } & & 105,000 \\\hline \text { Cost of sales } & & 500,000 \\\hline\end{array}$

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