Question

On January 1, 2021, Wright Transport sold four school buses to the Elmira School District. In exchange for the buses, Wright received a note requiring payment of $518,000 by Elmira on December 31, 2023. The effective interest rate is 9%

Required:

1. How much sales revenue would Wright recognize on January 1, 2021, for this transaction?

2. Prepare journal entries to record the sale of merchandise on January 1, 2021 (omit any entry that might be required for the cost of the goods sold), the December 31, 2021, interest accrual, the December 31, 2022, interest accrual, and receipt of payment of the note on December 31, 2023.

Answer 1

Answer 2

1.sales revenue

present value of 518000

r= 9%

n= 3years

[1/1.09]³

=5180000

518000*0.7721835

=399991$

2.

journal

		debit	credit	explanation
January 1, 2021	notes receivable	399991
	revenue		399991
December 31,2021	interest receivable	36000
	interest revenue		36000	[399991*9%]
December 31,2022	interest receivable	39239		[36000+399991]*9%
	interest revenue		39239
December 31 ,2023	cash	518000
	note receivable		399991
	interest receivable		75239	[36000+39239]
	interest revenue		42770	[75239+399991]*9% interest revenue for 2023