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rodikova [14]
2 years ago
6

On January 1, 2010, North Co. sold equipment and accepted in exchange a $600,000 zero-interest-bearing note due on January 1, 20

13. The effective rate of interest for a note of this type at 1/1/10 was 10%. Assume the present value of $1 at 10% for three periods is 0.75. What amount of interest revenue should be included in North's 2011 income statement?
Business
1 answer:
makvit [3.9K]2 years ago
3 0

Answer:

$49,500

Explanation:

Calculation for what amount of interest revenue should be included in North's 2011 income statement

First step is to find Zero-interest-bearing note due balance

Zero-interest-bearing note due balance

=$600,000 *0.75*10%

Zero-interest-bearing note due balance= $45,000

Second Step will be to calculate the interest revenue

Interest revenue=($450,000 + $45,000) *10%

Interest revenue= $495,000*10%

Interest revenue=49,500

Therefore what the amount of interest revenue should be included in North's 2011 income statement is $49,500

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Assuming  the bonds are sold at par value, the issuer will records the sale with a debit to: Cash $100,000.

<h3>Journal entry</h3>

Based on the information given if the company issues the amount of  $100,000 of 5%, 10-year bonds dated january 1 the appropriate journal entry to record this transaction is:

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Inconclusion the issuer will records the sale with a debit to: Cash $100,000.

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5 0
1 year ago
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3 0
2 years ago
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<u>Full question:</u>

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