Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

The next three questions use the below information. A company financed the sale of equipment and recorded a note receivable for the sale. The accountant

The next three questions use the below information.

A company financed the sale of equipment and recorded a note receivable for the sale. The accountant inappropriately recorded the sale at the coupon rate instead of market rate and fair value.

Cash received $80,000
Notes receivable 339,000
Sales price $419,000
Tax rate 30%
Estimated tax payment $23,000

Note information:

Term of the note 4 years
Coupon rate 1.5%
Market rate 7.7%

The note is due in equal annual payments of principle and interest.

Incorrect income statement, for the year ended December 31

Sales $739,000
Expenses 591,000
Interest revenue 5,085
Pretax income 153,085
Tax expense 45,926
Net income 107,159

What is the correct amount of sales for 20X1?

Note: You need to back out the incorrect sales amount used (the N/R at face value) and add in the correct sales amount. The correct sales amount is based on fair value of the note. See problem C7-170 as an example.

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Cost Accounting

Authors: Mark Lee Inman

1st Edition

0434908304, 9780434908301

More Books

Students also viewed these Accounting questions

Question

Explain the nature of human resource management.

Answered: 1 week ago

Question

In what ways can confl ict enrich relationships?

Answered: 1 week ago

Question

How do listening and hearing diff er?

Answered: 1 week ago

Question

How does eff ective listening diff er across listening goals?

Answered: 1 week ago