On January 1, 2021, C Company sold equipment with a carrying amount of 4,800,000. It accepted a noninterest bearing note for 6,000,000 due January 1, 2024. There was no established price for the equipment. The prevailing interest for a note of this type on January 1, 2021 was 10%. The present value of 1 at 10% for 3 periods is 0.75. What amount should be reported as interest income for 2021? a. 600,000 b. 500,000 c. 450,000 d. 90,000
On January 1, 2021, C Company sold equipment with a carrying amount of 4,800,000. It accepted a noninterest bearing note for 6,000,000 due January 1, 2024. There was no established price for the equipment. The prevailing interest for a note of this type on January 1, 2021 was 10%. The present value of 1 at 10% for 3 periods is 0.75. What amount should be reported as interest income for 2021? a. 600,000 b. 500,000 c. 450,000 d. 90,000
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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On January 1, 2021, C Company sold equipment with a carrying amount of 4,800,000. It accepted a noninterest bearing note for 6,000,000 due January 1, 2024. There was no established price for the equipment.
The prevailing interest for a note of this type on January 1, 2021 was 10%. The present value of 1 at 10% for 3 periods is 0.75.
What amount should be reported as interest income for 2021?
a. 600,000
b. 500,000
c. 450,000
d. 90,000
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