QUESTION 6

* Round all answers to the nearest whole dollar.

What amount of Service Revenue was recorded on January 1, 2015?

What amount of interest revenue should be recognized on this note for the year ending December 31, 2016?

What is the Carrying Value of the Note Receivable at December 31, 2016?

1. On January 1, 2015, ABC rendered services to Z Corp. in exchange for a $105,000, 3 year note. The terms of the agreement require Z Corp. to make semi-annual installment payments of P&I with the first installment due immediately. An annual interest rate of 8% is imputed. Each payment is to be received on Jan 1 and July 1. ABC's year-end is Dec 31.

$ Blank_1

$ Blank 2

$ Blank 3

2. On January 1, 2015 ABC rendered services in exchange for a $20,000 cash down payment (this down payment is NOT a PVAD; it is simply made to reduce the amount being financed) and a 3 year $90,000, 6% note. Interest is to be remitted each June 30 and Dec 31. Principal will be remitted at maturity. This customer has a credit rating which requires that money be borrowed at 10%.

$ Blank 4

$ Blank 5

$ Blank 6

2. Continued...

For Scenario #2 above, determine the Total Interest Revenue ABC will recognize over the entire three-year lending agreement.

$ Blank 7

1. From Scenario #1, Determine how much Service Revenue was recorded on January 1, 2015: $[Blank_1]

QUESTION 7

From Scenario #1, Determine how much interest revenue should be recognized on this note for the year ending December 31, 2016: $[Blank_2]

0.7142 points

QUESTION 8

For Scenario #1 above, Determine the carrying value of the note as of December 31, 2016: $[Blank_3]

0.7142 points

QUESTION 9

From Scenario #2 above, Determine how much Service Revenue should be recognized on January 1, 2015: $[Blank_4]

0.7142 points

QUESTION 10

From Scenario #2 above, Determine how much Interest Revenue should be reported for the year ended December 31, 2016: $[Blank_5]

0.7142 points

QUESTION 11

For Scenario #2, Determine the Carrying Value of the Note as of December 31, 2016: $[Blank_6]

0.7142 points

QUESTION 12

For Scenario #2 above, determine the Total Interest Revenue ABC will recognize over the entire three-year lending agreement: $[Blank_7]