On January 1, 2024, Whispering Winds Company sold property to Oriole Company which originally cost Whispering Winds $2640000. There was no established exchange price for this property. Oriole gave Whispering Winds a $4050000 zero - interest - bearing note payable in three equal annual installments of $1350000 with the first payment due December 31, 2024. The note has no ready market. The prevailing rate of interest for a note of this type is 10%. The present value of a $4050000 note payable in three equal annual installments of $1350000 at a 10% rate of interest is $3357250. What is the amount of interest income that should be recognized by
On January 1, 2024, Whispering Winds Company sold property to Oriole Company which originally cost Whispering Winds $2640000. There was no established exchange price for this property. Oriole gave Whispering Winds a $4050000 zero - interest - bearing note payable in three equal annual installments of $1350000 with the first payment due December 31, 2024. The note has no ready market. The prevailing rate of interest for a note of this type is 10%. The present value of a $4050000 note payable in three equal annual installments of $1350000 at a 10% rate of interest is $3357250. What is the amount of interest income that should be recognized by
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Transcribed Image Text:On January 1, 2024, Whispering Winds Company sold property to Oriole Company which
originally cost Whispering Winds $2640000. There was no established exchange price for this
property. Oriole gave Whispering Winds a $4050000 zero - interest - bearing note payable in three
equal annual installments of $1350000 with the first payment due December 31, 2024. The note
has no ready market. The prevailing rate of interest for a note of this type is 10%. The present
value of a $4050000 note payable in three equal annual installments of $1350000 at a 10% rate of
interest is $3357250. What is the amount of interest income that should be recognized by
Whispering Winds in 2024 if the effective - interest method is used? Select answer from the
options below a. $405000 b. $135000 c. $0 d. $335725
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