Question

Short Answer Question 4 - Non-Interesting bearing note On January 1, 2018, Rose Kim Co performed IT consulting services for Tee Wang Ca Tee Wang was short of cash and Rose Kim agreed to accept an $80,000 na Interest-bearing note due December 31, 2019 as payment in full Tee Wangis somewhat of a credit risk and typically borrows funds at a rate of 8% Rose Kim is much more creditworthy and has various ines of credit al 6%

Answer 1

	In the books of Rose kim
	Date	Particulars	Debit	Credit
(b)	01-Jan-18	Tee Wang A/c   Dr.	71200
		To, Sales		71200
	01-Jan-18	Note receivable A/c Dr.	71200
		To, Tee Wang		71200
('c)	Date	Opening balance	Interest	Closing balance
	31-Dec-18	71,200	4,272	75,472
	31-Dec-19	75,472	4,528	80,000
	In the books of Rose kim
(d)	Date	Particulars		Debit	Credit
	01-Jan-18	Tee Wang A/c   Dr.		71200
		To, Sales			71200
	01-Jan-18	Note receivable A/c Dr.		71200
		To, Tee Wang			71200
	31-Dec-18	Note receivable A/c Dr.		4,272
		To, Interest on Note receivable			4,272
	31-Dec-18	Interest on Note receivable A/c Dr.		4,272
		To, Profit and loss A/c			4,272
	31-Dec-19	Note receivable A/c Dr.		4,528
		To, Interest on Note receivable			4,528
	31-Dec-19	Interest on Note receivable A/c Dr.		4,528
		To, Profit and loss A/c			4,528
	31-Dec-19	Bank A/c Dr.		80,000
		To, Note receivable			80,000
	Present value of Consideration as on 01 january 2018
	=	80,000/(1.06)^2
	=	71199.7152