Question

Note Receivable Problem #3 On January 1, 2020, ABC sold merchandise for to a customer and agreed a $100,000 note receivable paid in four equal annual installments, each due on December 31. Note has no (zero) stated rate and an imputed interest rate of 8%. a. Determine the issue price of the note receivable. b. Provide the journal entry to record the bond issue? C. Determine the amount of interest revenue that Sparky will recognize over the life of the NR? PMT Int. Rev Dis Amort CV d. Fill in the amortization table: PMT # Date 1/1/2020 12/31/2020 12/31/2021 3 12/31/2022 12/31/2023 Totals e. Prepare the AJE for 12/31/2020

Answer 1

a.	$73,503
	Issue Price of Note Receivable = Present value of Bond Face Value
	n = 4
	r = 8%
	Face Value	$73,503
	$100,000 x PV of $1 8%, 4
	$100,000 x 0.73503
b.	General Journal	Debit	Credit
	Note Receivable	$100,000
	Discount on Note Receivable		$26,497
	Service Revenue		$73,503
c.	$26,497
d.
	Date	PMT	Interest Rev	Discount Amortization	Carrying Amount
	Jan 1, Year 1				$73,503
	Dec 31, Year 1	$0	$5,880	$5,880	$79,383
	Dec 31, Year 2	$0	$6,351	$6,351	$85,734
	Dec 31, Year 3	$0	$6,859	$6,859	$92,593
	Dec 31, Year 4	$0	$7,407	$7,407	$100,000
	Total		$26,497