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Trey Inc sells used machinery to Buyer Ltd. Buyer takes possession of the truck on October 1, 200 in exchange for a zero-interest bearing loan
Trey Inc sells used machinery to Buyer Ltd. Buyer takes possession of the truck on October 1, 200 in exchange for a zero-interest bearing loan of $75,000 payable to Trey. The book value of the machinery is $55,000 (Cost =120,000; Accumulated depreciation =65,000 ). Settlement of the loan will take place on September 30, 20X2. Buyer's normal borrowing rate is 5%. Trey's fiscal year end is December 31 . Required: (a) What will Trey report on its annual financial statements for the Loan Receivable (including the loan balance, interest Income, and gain/loss on sale of machinery) at December 31, 20X0? (b) Prepare the journal entry to derecognize the loan receivable at September 30, 202
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