Question

The Field Detergent Company sold merchandise to the Abel Company on June 30, 2016. Payment was made in the form of a noninterest-bearing note requiring Abel to pay $85,000 on June 30, 2018. Assume that a 10% interest rate properly reflects the time value of money in this situation.

Required: Calculate the amount at which Field should record the note receivable and corresponding sales revenue on June 30, 2016.

Answer 1

$70,248

Step-by-step explanation:

Calculation for the amount at which Field should record the note receivable and corresponding sales revenue on June 30, 2016

Using financial calculator to determine the PV of Note

Using this formula

PV of Note = Future value x PVF (i%, n)

Where,

Future value=85,000

n=2 year(2016-2018)

i= 10%

Let plug in the formula

PV Note= 85,000 x PVF (10%, 2)

PV Note= 85,000 x 0.82645

PV Note= $70,248

Therefore the amount at which Field should record the note receivable and corresponding sales revenue on June 30, 2016 is $70,248