On August 1, 2022, Nelson Corp. sold inventory in exchange for a 2-year non-interest-bearing note having a face value of $26,000. The present value of this note has already been determined to be $20,727. 12% is a reasonable cost of borrowing for non-interest-bearing notes of this nature. The note’s face value will be paid back on August 1, 2024. Nelson Corp. has a calendar year-end, uses the effective interest method, and uses the periodic inventory system. How would you put this as a journal entry? Date Cash Received Interest Revenue Carrying Value 8/1/22 X X 20727 8/1/23 X 2487 23214 8/1/24 X 2786 26000 8/1/24 26000 X 0 Totals 26000 5273 X
On August 1, 2022, Nelson Corp. sold inventory in exchange for a 2-year non-interest-bearing note having a face value of $26,000. The present value of this note has already been determined to be $20,727. 12% is a reasonable cost of borrowing for non-interest-bearing notes of this nature. The note’s face value will be paid back on August 1, 2024. Nelson Corp. has a calendar year-end, uses the effective interest method, and uses the periodic inventory system. How would you put this as a journal entry? Date Cash Received Interest Revenue Carrying Value 8/1/22 X X 20727 8/1/23 X 2487 23214 8/1/24 X 2786 26000 8/1/24 26000 X 0 Totals 26000 5273 X
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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On August 1, 2022, Nelson Corp. sold inventory in exchange for a 2-year non-interest-bearing note having a face value of $26,000. The present value of this note has already been determined to be $20,727. 12% is a reasonable cost of borrowing for non-interest-bearing notes of this nature. The note’s face value will be paid back on August 1, 2024. Nelson Corp. has a calendar year-end, uses the effective interest method, and uses the periodic inventory system. How would you put this as a
| Date | Cash Received | Interest Revenue | Carrying Value |
| 8/1/22 | X | X | 20727 |
| 8/1/23 | X | 2487 | 23214 |
| 8/1/24 | X | 2786 | 26000 |
| 8/1/24 | 26000 | X | 0 |
| Totals | 26000 | 5273 | X |
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