Question

On January 1, 2021, Glanville Company sold goods to Otter Corporation. Otter signed an installment note requiring payment of $21,000 annually for five years. The first payment was made on January 1, 2021. The prevailing rate of interest for this type of note at date of issuance was 8%. Glanville should record sales revenue in January 2021 _________.

Answer 1

$104,846.70

Step-by-step explanation:

The computation of the sales revenue recorded is shown below:

= Annual payments + annual payment × PVIFA factor for 8% at 5 years

where,

Annual payments is $21,000

And, the PVIFA factor is 3.9927

So, the sales revenue is

= $21,000 + $21,000 × 3.9927

= $21,000 + $83,846.70

= $104,846.70

The sales value should be equal to the annual payment or par value

And, refer to the PVIFA table