By December 31, 2013, Clearing Corp. had performed a significant amount of environmental consulting services for Rank Ltd. Rank was short of cash, and Clearing agreed to accept a $200,000, non- interest-bearing note due December 31, 2015, as payment in full. Rank is a bit of a credit risk and typically borrows funds at a rate of 12%. Clearing is much more creditworthy and has various lines of credit at 9%.
(a) Prepare the journal entry to record the transaction on December 31, 2013, for Clearing Corp.
(b) Assuming Clearing's fiscal year end is December 31, prepare the journal entry required at December 31, 2014.
(c) Assuming Clearing's fiscal year end is December 31, prepare the journal entry required at December 31, 2015.
(d) What are the amount and classification of the note on Clearing Corp.'s statement of financial position as at December 31, 2014?
(e) If an appropriate market rate of interest for the note receivable is not known, how should the transaction be valued and recorded on December 31, 2013?