Question

On January 1, 2020, Marigold Corp. exchanged equipment for a $650000 zero-interest-bearing note due on January 1, 2023. The prevailing rate of interest for a note of this type at January 1, 2020 was 12%. The present value of $1 at 12% for three periods is 0.71. What amount of interest revenue should be included in Marigold's 2021 income statement

Answer 1

$62,026

Step-by-step explanation:

Calculation for What amount of interest revenue should be included in Marigold's 2021 income statement

First step is to calculate present value of note

Present value of note=$650,000 × .71

Present value of note= $461,500

Second step is to calculate the increase in Present value of note

Increase in Present value of note =$461,500 × 1.12

Increase in Present value of note= $516,880

Now let calculate amount of interest revenue

Interest revenue=$516,880 × 0.12

Interest revenue= $62,026

Therefore What amount of interest revenue should be included in Marigold's 2021 income statement is $62,026