On January 1, 2024, the Apex Company exchanged some shares of common stock it had been holding as an investment for a note receivable. The note principal plus interest is due on January 1, 2025. The 2021 income statement reported $2,310 in interest revenue from this note and a $6,100 gain on sale of investment in stock. The stock’s book value was $17,000. The company’s fiscal year ends on December 31.Required:1. What is the note’s effective interest rate?2. Reconstruct the journal entries to record the sale of the stock on January 1, 2024, and the adjusting entry to record interest revenue at the end of 2024. The company records adjusting entries only at year-end.

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
Chapter16: Retained Earnings And Earnings Per Share
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On January 1, 2024, the Apex Company exchanged some shares of common stock it had been holding as an investment for a note receivable. The note principal plus interest is due on January 1, 2025. The 2021 income statement reported $2,310 in interest revenue from this note and a $6,100 gain on sale of investment in stock. The stock’s book value was $17,000. The company’s fiscal year ends on December 31.
Required:
1. What is the note’s effective interest rate?
2. Reconstruct the journal entries to record the sale of the stock on January 1, 2024, and the adjusting entry to record interest revenue at the end of 2024. The company records adjusting entries only at year-end.

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