Homework Answers
| The correct answer is (4th) : is credited to sales revenue at the exchange date | |||
| Explanation through an example | |||
| Let Cost of equipment | $10,000 | ||
| Long term note received for 5 years. Interest rate of note 5% p.a. and market rate is also 5% | |||
| Since, market rate and coupon rate of the long term note is same hence, present value of future cash flows is also $10,000. | |||
| hence, entry to be passed at the time of sale | |||
| Debit | Credit | ||
| Dr. Long term note receivable | $10,000 | ||
| Cr. Sales revenue | $10,000 | ||
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