Question
Lily Company performed services for a customer on January 1, 20x1 and accepted a four-year, $70,000, noninterest-bearing note. The note requires the customer to make
Lily Company performed services for a customer on January 1, 20x1 and accepted a four-year, $70,000, noninterest-bearing note. The note requires the customer to make 4 annual payments of principal and interest in the amount of $17,500 each.The first payment is due on December 31, 20x1 and each December 31st thereafter.Assuming a market rate of 5%, determine:
Question 1: Service revenue recognized upon issuance of the note
Question 2: Total interest revenue recognized over the term of the note.
DATA: PV of $1 (5%, 4n) .82270; PVOA (5%, 4n) 3.54595, PVAD (5%, 4n) 3.72325
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