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%. The entry to record interest on December 31, 2018 would be:

A) $\begin{array}{|l|r|r|}\hline \text { Cash } & 50,000 & \\\hline \text { Interest receivable } & & 50,000 \\\hline\end{array}$
B) $\begin{array}{|l|r|l|}\hline \text { Cash } & 50,000 & \\\hline \text { Discount on note receivable } & & 50,000 \\\hline\end{array}$
C) $\begin{array}{|c|r|r|}\hline \text { Discount on note receivable } & 50,000 & \\\hline \text { Note receivable } & & 50,000 \\\hline\end{array}$
D) $\begin{array}{|c|r|r|}\hline \text { Discount on note receivable } & 50,000 & \\\hline \text { Interest revenue } & & 50,000 \\\hline\end{array}$

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