Cypress Oil Company's December 31, 2021, balance sheet listed $734,000 of notes receivable and $21,200 of interest receivable included in current assets. The following notes make up the notes receivable balance: Note 1 Dated 8/31/2021, principal of $360,000 and interest at 10% due on 2/28/2022. Note 2 Dated 6/30/2021, principal of $230,000 and interest due 3/31/2022. Note 3 $150,000 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?
Cypress Oil Company's December 31, 2021, balance sheet listed $734,000 of notes receivable and $21,200 of interest receivable included in current assets. The following notes make up the notes receivable balance: Note 1 Dated 8/31/2021, principal of $360,000 and interest at 10% due on 2/28/2022. Note 2 Dated 6/30/2021, principal of $230,000 and interest due 3/31/2022. Note 3 $150,000 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?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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What is the Required 1-3?
Transcribed Image Text:Cypress Oil Company's December 31, 2021, balance sheet listed $734,000 of notes receivable and $21,200 of interest receivable
included in current assets. The following notes make up the notes receivable balance:
Note 1 Dated 8/31/2021, principal of $360,000 and interest at 10% due on 2/28/2022.
Note 2 Dated 6/30/2021, principal of $230,000 and interest due 3/31/2022.
Note 3 $150,000 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.
Discount rate
:%
2.
Interest rate
3.
Interest revenue
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