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ss7ja [257]
3 years ago
9

Clancy Co. accepted a two-year noninterest-bearing note for $1,166,400 on January 1, 2020. The note was accepted as payment for

merchandise with a fair value of $1,000,000. The effective interest rate is 8%.The cash collection on December 31, 2021, would be recorded as___________.
Business
1 answer:
lapo4ka [179]3 years ago
8 0

Answer:

Dr Cash 1,166,400

Cr Notes Receivable 1,000,000

Cr Interest Revenue 166,400

Explanation:

To determine the net amount of the notes receivable that will be recorded, we must determine the present value of the note:

present value = 1,166,400 / (1 + 8%)² = 1,166,400 / 1.1664 = 1,000,000

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