Question
On January 1, 2021,Bramble Corp.sold property toCullumber Companywhich originally costBramble$2690000. There was no established exchange price for this property.CullumbergaveBramblea $4050000zero-interest-bearing note payable in three equal
On January 1, 2021,Bramble Corp.sold property toCullumber Companywhich originally costBramble$2690000. There was no established exchange price for this property.CullumbergaveBramblea $4050000zero-interest-bearing note payable in three equal annual installments of $1350000with the first payment due December 31, 2021. The note has no ready market. The prevailing rate of interest for a note of this type is10%. The present value of a $4050000note payable in three equal annual installments of $1350000at a10% rate of interest is $3357450. What is the amount of interest income that should be recognized byBramblein 2021, using the effective-interest method?
$335745.
$405000.
$0.
$135000.
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