Cypress Oil Company's December 31, 2021, balance sheet listed $727,000 of notes receivable and $21,300 of interest receivable included in current assets. The following notes make up the notes receivable balance: Note 1 Dated 8/31/2021, principal of $390,000 and interest at 9% due on 2/28/2022. Note 2 Dated 6/30/2021, principal of $240,000 and interest due 3/31/2022. Note 3 $100,000 face value noninterest-bearing note dated 9/30/2021, due 3/31/2022. Note was issued in exchange for merchandise. The company records adjusting entries only at year-end. There were no other notes receivable outstanding during 2021. Required: 1. Determine the rate used to discount the noninterest-bearing note. 2. Determine the explicit interest rate on Note 2. (Round your intermediate calculations to the nearest whole dollar amount.) 3. What is the amount of interest revenue that appears in the company's 2021 income statement related to these notes? 1. 2. 3. Discount rate Interest rate Interest revenue Answer is not complete. 12 % %

Cypress Oil Company's December 31, 2021, balance sheet listed $727,000 of notes receivable and $21,300 of interest receivable included in current assets. The following notes make up the notes receivable balance: Note 1 Dated 8/31/2021, principal of $390,000 and interest at 9% due on 2/28/2022. Note 2 Dated 6/30/2021, principal of $240,000 and interest due 3/31/2022. Note 3 $100,000 face value noninterest-bearing note dated 9/30/2021, due 3/31/2022. Note was issued in exchange for merchandise. The company records adjusting entries only at year-end. There were no other notes receivable outstanding during 2021. Required: 1. Determine the rate used to discount the noninterest-bearing note. 2. Determine the explicit interest rate on Note 2. (Round your intermediate calculations to the nearest whole dollar amount.) 3. What is the amount of interest revenue that appears in the company's 2021 income statement related to these notes? 1. 2. 3. Discount rate Interest rate Interest revenue Answer is not complete. 12 % %

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Question

Cypress Oil Company's December 31, 2021, balance sheet listed $727,000 of notes receivable and $21,300 of interest receivable
included in current assets. The following notes make up the notes receivable balance:
Note 1 Dated 8/31/2021, principal of $390,000 and interest at 9% due on 2/28/2022.
Note 2 Dated 6/30/2021, principal of $240,000 and interest due 3/31/2022.
Note 3 $100,000 face value noninterest-bearing note dated 9/30/2021, due 3/31/2022. Note was issued in exchange for
merchandise.
The company records adjusting entries only at year-end. There were no other notes receivable outstanding during 2021.
Required:
1. Determine the rate used to discount the noninterest-bearing note.
2. Determine the explicit interest rate on Note 2. (Round your intermediate calculations to the nearest whole dollar amount.)
3. What is the amount of interest revenue that appears in the company's 2021 income statement related to these notes?
1.
2.
3.
Discount rate
Interest rate
Interest revenue
Answer is not complete.
12 %
%

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Step 1: Introduction of non interest bearing note

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Step 2: Requirement 1 - Computation of the discount rate for non interest bearing note

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Step 3: Requirement 2 - Computation of the explicit interest rate:

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Step 4: Requirement 3 - Computation of the amount of interest expense

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