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On December 31, 2020, Sarasota Co. performed environmental consulting services for Hayduke Co. Hayduke was short...

On December 31, 2020, Sarasota Co. performed environmental consulting services for Hayduke Co. Hayduke was short of cash, and Sarasota Co. agreed to accept a $296,200 zero-interest-bearing note due December 31, 2022, as payment in full. Hayduke is somewhat of a credit risk and typically borrows funds at a rate of 10%. Sarasota is much more creditworthy and has various lines of credit at 6%.

Prepare the journal entry to record the transaction of December 31, 2020, for the Sarasota Co.

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Answer
Date Account Titles & Explanation Debit Credit
December 31,2020 Notes Receivable $     296,200
Service Revenue $     244,793
Discount on Notes Receivable $       51,407
Calculation-
Service revenue = $296200*Present value factor for second year at 10%
Service revenue = $296200*0.826446
Service revenue = $244,793
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