Sumarah Corporation accepted a $ 225,000 two- year note receivable from a customer in connection with a
Question:
Sumarah Corporation accepted a $ 225,000 two- year note receivable from a customer in connection with a major inventory sale transaction on 1 October 20X5. he note was interest- free, although market interest rates were in the range of 8%.
Required:
1. Can the company record a sale for $ 225,000? Explain.
2. Calculate the present value of the note, and prepare a schedule that shows the annual interest using the efective interest method. Prepare a second schedule using the straight line method.
3. Compare the two alternate measures of interest revenue as calculated in requirement 2. Which is more accurate? Explain. What method( s) are permitted under ASPE? IFRS?
4. Prepare journal entries to record the initial sale transaction and each payment on the books of Sumarah, using the straight- line method. Use the gross method to record the note.
CorporationA Corporation is a legal form of business that is separate from its owner. In other words, a corporation is a business or organization formed by a group of people, and its right and liabilities separate from those of the individuals involved. It may...
Step by Step Answer:
Intermediate Accounting
ISBN: 978-0071339476
Volume 1, 6th Edition
Authors: Beechy Thomas, Conrod Joan, Farrell Elizabeth, McLeod Dick I