Question

Exercise 7-14 (Part Level Submission)

On December 31, 2015, Concord Co. performed environmental consulting services for Hayduke Co. Hayduke was short of cash, and Concord Co. agreed to accept a $340,000 zero-interest-bearing note due December 31, 2017, as payment in full. Hayduke is somewhat of a credit risk and typically borrows funds at a rate of 12%. Concord is much more creditworthy and has various lines of credit at 6%.

Assuming Concord Co.’s fiscal year-end is December 31, prepare the journal entry for December 31, 2017.

Answer 1

	Journal Entries
Date	Accounting titles & Explanations				Debit	Credit
2015
31-Dec	Notes receivable				$ 340,000.00
	Discount on notes receivable					$    68,952.00
	sales revenue					$ 271,048.00
	computation of present value of note
	PV of $340000 due in 2 years at 12%
	$340000*0.7972
2016
31-Dec	Discount on notes receivable				$   32,525.76
	interest revenue					$    32,525.76
Question requirement :
2017
31-Dec	discount on notes receivable				$   36,426.24
	interest revenue					$    36,426.24
	(68952-32526)
	Cash				$ 340,000.00
	notes receivable					$ 340,000.00
	(To record collection of note )