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18.Booster Company received a three-year, non-interest bearing note for P500,000 for merchandise sold on January 1, 2021.   The current interest rate at that time was 15% for similar notes.   Booster recorded the receipt of the note as follows: Notes Receivable         500,000       Sales                               500,000 What is the effect of this accounting for notes receivable on Booster Company's profit for years 2021, 2022 and 2023 and its retained earnings at the end of 2023, respectively?     a. Overstate, overstate, understated, no effect b. Overstate, understate, understate, no effect c. Overstate, understate, understate, understate d. No effect on any of these

18.Booster Company received a three-year, non-interest bearing note for P500,000 for merchandise sold on January 1, 2021.   The current interest rate at that time was 15% for similar notes.   Booster recorded the receipt of the note as follows: Notes Receivable         500,000       Sales                               500,000 What is the effect of this accounting for notes receivable on Booster Company's profit for years 2021, 2022 and 2023 and its retained earnings at the end of 2023, respectively?     a. Overstate, overstate, understated, no effect b. Overstate, understate, understate, no effect c. Overstate, understate, understate, understate d. No effect on any of these

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
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18.Booster Company received a three-year, non-interest bearing note for P500,000 for merchandise sold on January 1, 2021.   The current interest rate at that time was 15% for similar notes.   Booster recorded the receipt of the note as follows:

Notes Receivable         500,000
      Sales                               500,000

What is the effect of this accounting for notes receivable on Booster Company's profit for years 2021, 2022 and 2023 and its retained earnings at the end of 2023, respectively?
 
 
a. Overstate, overstate, understated, no effect
b. Overstate, understate, understate, no effect
c. Overstate, understate, understate, understate
d. No effect on any of these
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