Drebin Security Systems sold merchandise to a customer in exchange for a $50,000, 5-year, noninterest-bearing notewhen an equivalent loan would carry 10% interest. Drebin would record sales revenue on the date of sale equal to:

A.$50,000.

B. Zero.

C. The future value of $50,000 using a 10% interest rate.

D. The present value of $50,000 using a 10% interest rate.

Question

Business

Lorenzo Dean

23 November, 11:42

Drebin Security Systems sold merchandise to a customer in exchange for a $50,000, 5-year, noninterest-bearing notewhen an equivalent loan would carry 10% interest. Drebin would record sales revenue on the date of sale equal to:

A.$50,000.

B. Zero.

C. The future value of $50,000 using a 10% interest rate.

D. The present value of $50,000 using a 10% interest rate.

+1

Answers (1)

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Quinn Chen · Answer 1

D. The present value of $50,000 using a 10% interest rate.

Explanation:

Data are given in the question

Sold merchandise in exchange of $50,000 5-year, non-interest-bearing note

Plus the interest rate on equivalent loan is 10%

So by considering the above information, the sales revenue should be recorded at the current value i. e come by considering the present value of $50,000 having the 10% interest rate