Question

The Field Detergent Company sold merchandise to the Abel Company on June 30, 2018. Payment was made in the form of a noninterest-bearing note requiring Abel to pay $85,000 on June 30, 2020. Assume that a 10% interest rate properly reflects the time value of money in this situation. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) (Use appropriate factor(s) from the tables provided.) Required: Calculate the amount at which Field should record the note receivable and corresponding sales revenue on June 30, 2018.

Answer 1

$70,247.93

Step-by-step explanation:

The amount at which Field Detergent Company would record the note receivable and the corresponding sales revenue on June 30 2018 is the present value of the non-interest bearing note which has a future value of $85,000

PV=FV*(1+r)^-n

FV is the $85,000 receivable in two years

r is the 10% interest rate that properly reflects time value of money

n is the time horizon between when the note was signed and payment expected which is 2 years

PV=$85,000*(1+10%)^-2=$70,247.93