On January 1, 2021, Hodge Beanery received $8,000 from the Kennedy Company in exchange for a coffee
Question:
On January 1, 2021, Hodge Beanery received $8,000 from the Kennedy Company in exchange for a coffee roaster that it will deliver to Kennedy on December 31, 2021. Assuming that Hodge views the time value of money to be a significant component of this transaction, and that a 9% interest rate is applicable, how much deferred revenue would Hodge recognize on January 1, 2021?
Step by Step Answer:
If payment occurs before delivery conceptually the arrangement includes a financing componentWhen the financing component is deemed to be significant prepayments like those to Hodge we include an elem...View the full answer
Intermediate Accounting
ISBN: 978-1260481952
10th edition
Authors: J. David Spiceland, James Sepe, Mark Nelson, Wayne Thomas
Related Video
The time value of money (TVM) is the concept that the money you have in your pocket today is worth more than the same amount would be if you received it in the future because of the profit it can earn during the interim.
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