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

Intermediate Accounting: Reporting And Analysis

3rd Edition

ISBN:9781337788281

Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Chapter13: Investments And Long-term Receivables

Section: Chapter Questions

Problem 10MC: On January 1, 2019, Park Company accepted a 36,000, non-interest-bearing, 3-year note from a major...

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On January 1, 2019, Park Company accepted a 36,000, non-interest-bearing, 3-year note from a major customer in exchange for used equipment. The equipment had originally cost Park 200,000 and had a book value of 20,000 on the date of the sale. At the 12% imputed interest rate for this type of loan, the present value of the note is 25,500 on January 1, 2019. Park uses the effective interest rate. What is the carrying value of the note receivable on Parks December 31, 2019, balance sheet? a. 28,560 b. 29,000 c. 32,500 d. 36,000
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None
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