On December 31, 2018, COVID Company finished consultation services and accepted in exchange a promissory note with a face value of €450,000, a due date of December 31, 2021, and a stated rate of 5%, with interest receivable at the end of each year. The fair value of the services is not readily determinable and the note is not readily marketable. Under the circumstances, the note is considered to have an .appropriate imputed rate of interest of 10% Required: (Show your Working. You have the option to upload your answer/working for this question via (the provided link/ button Prepare the entries that would be recorded by COVID company for the sale and for the receipt and interest :on the following dates A) 31 December 2018 B) 31 December 2019 C) 31 December 2020 D) 31 December 2021

On December 31, 2018, COVID Company finished consultation services and accepted in exchange a promissory note with a face value of €450,000, a due date of December 31, 2021, and a stated rate of 5%, with interest receivable at the end of each year. The fair value of the services is not readily determinable and the note is not readily marketable. Under the circumstances, the note is considered to have an .appropriate imputed rate of interest of 10% Required: (Show your Working. You have the option to upload your answer/working for this question via (the provided link/ button Prepare the entries that would be recorded by COVID company for the sale and for the receipt and interest :on the following dates A) 31 December 2018 B) 31 December 2019 C) 31 December 2020 D) 31 December 2021

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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(Zero-Interest-Bearing Note Receivable) On September 30, 2016, Rolen Machinery Co. sold a machine and accepted the customer’s zero-interest-bearing note. Rolen normally makes sales on a cash basis. Since the machine was unique, its sales price was not determinable using Rolen’s normal pricing practices.After receiving the first of two equal annual installments on September 30, 2017, Rolen immediately sold the note with recourse. On October 9, 2018, Rolen received notice that the note was dishonored, and it paid all amounts due. At all times prior to default, the note was reasonably expected to be paid in full.Instructions(a) (1) How should Rolen determine the sales price of the machine?(2) How should Rolen report the effects of the zero-interest-bearing note on its income statement for the year ended December 31, 2016? Why is this accounting presentation appropriate?(b) What are the effects of the sale of the note receivable with recourse on Rolen’s income statement for the year ended…
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