On December 31,2017, Jovial Company received two 1,000,000 notes receivable from customers in exchange for service rendered.
Question:
On December 31,2017, Jovial Company received two 1,000,000 notes receivable from customers in exchange for service rendered.
On both notes, Interest is calculated on the outstanding principal balance at the annual rate of 3% and payable at maturity.
The note from zeta company, made under customary trade terms, is due in nine months and the note from Yola company is due in five years.
The market interest rate for similar notes on December 31,2017 at 8%
The present value of 1 due in nine months is .944 and the present value of 1 due in five years is .68.
1. At What amount should the note receivable from zeta company be reported on December 31,2017?
a. 1,000,000
b. 944,000
c. 965,200
d. 972,320
2. At What amount should the note receivable from Yola company be reported on December 31,2017?
a. 1,000,000
b. 782,000
c. 932,000
d. 680,000
Expert Answer:
Construction accounting and financial management
ISBN: 978-0135017111
2nd Edition
Authors: Steven j. Peterson
