Question

Montana Furniture Mart sold $120,000 of furniture and accepted the customer's $120,000 10%, 1-year note receivable in exchange. What would be the debit in this journal entry to record the sale if 10% approximates the market rate of return?

Answer 1

$12,000

Step-by-step explanation:

The reason is that the 10% of the amount $120,000 is $12,000 which is the rate of return which the Montana Furniture Mart has earned due to the sales of the furniture, so the amount that must be debited as interest income at the end of year would be:

Dr Interest Income $12000

Cr Cash or Bank Accout $12,000