Example on Notes receivable
Assume that ABC Corp. sold computers to XYZ Co. for $ 60,000 and receives in exchange a three year, $ 60,000 note bearing interest at 8% annually.
Required: Record the entries needed in ABC Corp. For receipt of note and recognition of interest revenue each year assuming the following independent cases:
Case 1: If the market interest rate for a note of similar risk is 8%
Case 2: If the market interest rate for a note of similar risk is 10 %
Case 3: If the Note is Zero interest bearing note and the market interest rate is 11 %.