Question

The Field Detergent Company sold merchandise to the Abel Company on June 30, 2021. Payment was made in the form of a noninterest-bearing note requiring Abel to pay $85,000 on June 30, 2023. 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, 2021. (Round your final answers to nearest whole dollar amount.)

Answer 1

The Field Detergent Company should record a note receivable and sales revenue at the present value of the noninterest-bearing note payable by the Abel Company, which is $70,248, using a discount rate of 10% reflecting the time value of money.

Step-by-step explanation:

The question concerns accounting and finance, specifically dealing with the topics of notes receivable and sales revenue recognition when involving a noninterest-bearing note. To calculate the present value of the note that the Field Detergent Company should recognize as a receivable from the Abel Company, the concept of present value (PV) must be applied using the appropriate interest rate to reflect the time value of money.

To find the PV of the $85,000 note due in two years at a 10% annual discount rate:

Identify the future value (FV), which is $85,000.

Use the PV of $1 formula: PV = FV / (1 + r)n, where r is the interest rate and n is the number of periods.

Calculate the PV, assuming the 10% interest rate properly reflects the time value of money: PV = $85,000 / (1 + 0.10)2 = $85,000 / 1.21 = $70,247.93 (rounded to nearest whole dollar).

Therefore, the Field Detergent Company should record a note receivable and corresponding sales revenue of $70,248 on June 30, 2021.

Answer 2

$70,428.25

Step-by-step explanation:

The computation of the amount at which field should record the note receivable is shown below:

Present value = Future value × PVF (i%, n)

= $85,000 × PVF (10%,2)

= $85,000 × 0.82645

= $70,428.25

Hence, the amount at which record the note receivable $70,428.25

We simply applied the above formula so that the present value could come