Cypress Oil Companys December 31, 2021, balance sheet listed $645,000 of notes receivable and $16,000 of interest
Question:
Cypress Oil Company’s December 31, 2021, balance sheet listed $645,000 of notes receivable and $16,000 of interest receivable included in current assets. The following notes make up the notes receivable balance:
Note 1 Dated 8/31/2021, principal of $300,000 and interest at 10% due on 2/28/2022.
Note 2 Dated 6/30/2021, principal of $150,000 and interest due 3/31/2022.
Note 3 $200,000 face value noninterest-bearing note dated 9/30/2021, due 3/31/2022.
Note was issued in exchange for merchandise.
The company records adjusting entries only at year-end. There were no other notes receivable outstanding during 2021.
Required:
1. Determine the rate used to discount the noninterest-bearing note.
2. Determine the explicit interest rate on Note 2.
3. What is the amount of interest revenue that appears in the company’s 2021 income statement related to these notes?
Balance sheet is a statement of the financial position of a business that list all the assets, liabilities, and owner’s equity and shareholder’s equity at a particular point of time. A balance sheet is also called as a “statement of financial... Face Value
Face value is a financial term used to describe the nominal or dollar value of a security, as stated by its issuer. For stocks, the face value is the original cost of the stock, as listed on the certificate. For bonds, it is the amount paid to the...
Step by Step Answer:
Requirement 1 Total face value of notes 300000 150000 200000 650000 Balance ...View the full answer
Intermediate Accounting
ISBN: 978-1260481952
10th edition
Authors: J. David Spiceland, James Sepe, Mark Nelson, Wayne Thomas
