11. An entity received a seven year zero interest bearing note on February 1, 2019 inexchange for a property sold. There was no established exchange price for property andthe note has no ready market. The prevailing rate of interest for a note of this type was7% on February 1, 2019, 6% on December 31, 2019, 8% on February 1, 2020 and 9% onDecember 31, 2020. What interest rate should be used to calculate the interest revenuefrom the transaction for the years ended December 31, 2019 and 2020, respectively?a. 0% and 0%b. 7% and 7%c. 7% and 9%d. 6% and 9%

Interest on the note prevailing on just December 31 will be considered as the interest rate for…

Answered: 11. An entity received a seven year…

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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December 11, 2019, Hooper Inc. made a credit sale to Marshall Company and required Marshall to sign a $12,000, 60-day note. Prepare the journal entries necessary to record the receipt of the note by Hooper, the accrual of interest on December 31, 2019, and the customer’s repayment on February 9, 2020, assuming: 1. Interest of 12% was assessed in addition to the face value of the note. 2. The note was issued as a $12,000 non-interest-bearing note with a present value of $11,765. The implicit interest rate on the note receivable was 12%. Assume a 360-day year. (Round to the nearest dollar.）
On January 1, 2021, Bonita Industries sold property to Sandhill Company. There was no established exchange price for the property, and Sandhill gave Bonita a $4500000 zero-interest-bearing note payable in 5 equal annual installments of $900000, with the first payment due December 31, 2021. The prevailing rate of interest for a note of this type is 9%. The present value of the note at 9% was $3500730 at January 1, 2021. What should be the balance of the Discount on Notes Payable account on the books of Sandhill at December 31, 2021 after adjusting entries are made, assuming that the effective-interest method is used? $713252. $684204. $999270. $0.
On January 1, 2018, Byner Company purchased a used tractor. Byner paid $5,000 down and signed a noninterest-bearing note requiring $25,000 to be paid on December 31, 2020. The fair value of the tractor is not determinable. An interest rate of 10% properly reflects the time value of money for this type of loan agreement. Thecompany’s fiscal year-end is December 31.Required:1. Prepare the journal entry to record the acquisition of the tractor. Round computations to the nearest dollar.2. How much interest expense will the company include in its 2018 and 2019 income statements for this note?3. What is the amount of the liability the company will report in its 2018 and 2019 balance sheets forthis note?
On October 18, Blue Ridge Corporation accepted a $300,000 non-interest-bearing note from Long Corporation. What is the maturity value of the note? Use ordinary interest. Maturity Value
[The following information applies to the questions displayed below.] Agrico Inc. accepted a 10-month, 12.8% (annual rate), $9,000 note from one of its customers on May 15, 2019; interest is payable with the principal at maturity. b-1. Prepare the horizontal model to record collection of the note and interest at maturity. (Use amounts with + for increases and amounts with – for decreases.) Please don't provide solution image based thanku
On January 2, 2025, Oriole Inc. sells goods to Sheridan Company in exchange for a zero-interest-bearing note with face value of $10,500, with payment due in 12 months. The fair value of the goods at the date of sale is $9,500 (cost $5,700). (a1) Prepare the journal entry to record this transaction on January 2, 2025. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No entry" for the account titles and enter O for the amounts. List all debit entries before credit entries.) Date Jan. 2, 2025 Jan. 2, 2025 Account Titles and Explanation (To record sales) (To record cost of goods sold) Debit Credit
The Field Detergent Company sold merchandise to the Abel Company on June 30, 2021. Payment was made in the form of a noninterest-bearing note requiring Abel to pay $85,000 on June 30, 2023. Assume that a 10% interestrate properly reflects the time value of money in this situation.Required:Calculate the amount at which Field should record the note receivable and corresponding sales revenue on June 30, 2021.
On January 1, 2024, Whispering Winds Company sold property to Oriole Company which originally cost Whispering Winds $2640000. There was no established exchange price for this property. Oriole gave Whispering Winds a $4050000 zero - interest - bearing note payable in three equal annual installments of $1350000 with the first payment due December 31, 2024. The note has no ready market. The prevailing rate of interest for a note of this type is 10% . The present value of a $4050000 note payable in three equal annual installments of $1350000 at a 10% rate of interest is $3357250. What is the amount of interest income that should be recognized by Whispering Winds in 2024 if the effective - interest method is used? Select answer from the options below a. $405000 b. $135000 c. $0 d. $335725
On January 1, 2025, Vaughn Co. sold equipment in exchange for an $930000 zero-interest-bearing note due on January 1, 2028. The prevailing rate of interest for a note of this type at January 1, 2025 was 10%. The present value of $1 at 10% for three periods is 0.75131. What amount of interest revenue should be reported in Vaughn's 2026 income statement? O $93000 $69872 O $0 O $76859
9
On January 1, 2020, Ann Price loaned $157773 to Joe Kiger. A zero-interest-bearing note (face amount, $210000) was exchanged solely for cash; no other rights or privileges were exchanged. The note is to be repaid on December 31, 2022. The prevailing rate of interest for a loan of this type is 10%. The present value of $210000 at 10% for three years is $157773. What amount of interest income should Ms. Price recognize in 2020? $44350. $63000. $15777. $21000.
On January 1, 2023, Karen Hong lent $64612 to Ben Bachu. A zero-interest-bearing note (face amount, $86000) was exchanged solely for cash; no other rights or privileges were exchanged. The note is to be repaid on December 31, 2025. The market rate of interest for a loan of this type is 10%. To the nearest dollar, and using the effective interest method, how much interest revenue should Ms. Hong recognize in 2023? $19383 $6461 $25800 ○ $8600

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