a. On January 1, 2020, Pato Corp. accepted an 8 percent three-year $700,000 note from Berlusconi Co. in exchange for a service it provided to Berlusconi. The effective yield (market rate) for such a note is 10 percent.

8 percent 10 percent

Present value of 1 (3 periods) 0.79383 0.75131

FutureValue of 1 (3 periods) 1.25971 1.33100

Present Value of an Ordinary Annuity of 1 (3 periods) 2.57710 2.48685

Future Value of an Ordinary Annuity of 1 (3 periods) 3.24640 3.31000

How much sales revenue should Pato record?

a. 651,962

b. 660,882

c. 665,181

d. 700,000

On January 1 2020, Pato Corp accepted an 8 percent three-year $700,000 note from Berlusconi Co. in exchange for a service it provided to Berlusconi. The effective yield (market rate) for such a note is 10 percent.

8 percent 10 percent

Present value of 1 (3 periods) 0.79383 0.75131

FutureValue of 1 (3 periods) 1.25971 1.33100

Present Value of an Ordinary Annuity of 1 (3 periods) 2.57710 2.48685

Future Value of an Ordinary Annuity of 1 (3 periods) 3.24640 3.31000

How much interest revenue should Pato record over the life of the note?

a. 34,819

b. 71,851

c.168,000

d. 202,815

b. Cruise Industries purchased $10,000 of merchandise on February 1, 2020 with credit terms of 2/10, n/60. It returned $2,500 worth of merchandise on February 4. Assume Cruise paid its invoice on February 9 How does Cruise record its payment on February 9 if it uses the perpetual inventory system and gross method for recording purchase discounts?

a. AP: 10,000

Cash 10,000

b. AP: 7,500

Cash: 7,350

Purchase discounts 150

c. AP: 7,350

Cash: 7,350

d. AP: 7,500

Cash: 7,350

Inventory: 150

Assume cruise paid its invoice on March 9. How does cruise record its payment on March 9 if it uses the periodic inventory system and net method for recording purchase discounts?

a. AP: 10,000

Cash 10,000

b. AP: 7,350

Discounts forfeited: 150

Cash: 7,500

c. AP: 7,500

Cash: 7,500

d. AP: 7,350

Inventory: 150

Cash: 7,500