Ask Question
26 June, 21:03

Frank Ricard Inc. sells inventory on January 1st 2020 in exchange for a $2,000 note, due in 2 years (i. e., zero interest bearing). The effective interest rate for this note is 10 percent.

1. Prepare all journal entries related to note and any related interest from January 1st, through the repayment on January 1st 2022.

+5
Answers (1)
  1. 26 June, 22:12
    0
    January 1st, 2020. The journal entry to record the note:

    Dr Notes receivable 2,000

    Cr Merchandise inventory 1,653

    Cr Interest income 347

    January 1st, 2022. The journal entry to record the collection of the note:

    Dr Cash 2,000

    Cr Notes receivable 2,000

    Explanation:

    You mus first determine the present value of the note = $2,000 / 1.1² = $1,653,

    so the imputed interest = $2,000 - $1,653 = $347
Know the Answer?
Not Sure About the Answer?
Find an answer to your question ✅ “Frank Ricard Inc. sells inventory on January 1st 2020 in exchange for a $2,000 note, due in 2 years (i. e., zero interest bearing). The ...” in 📘 Business if you're in doubt about the correctness of the answers or there's no answer, then try to use the smart search and find answers to the similar questions.
Search for Other Answers