Question

	On January 1, 2019, Adani Inc. sells goods to Geo Co. in exchange for a zero interest
	bearing note with a face value of $20,000, with payment due in 12 months.   The
	fair value of the goods sold at the date of sale is $18,000 (Cost 10,000).
a	Prepare the journal entry to record this transaction of January 1, 2019.
	Prepare the journal entries at December 31, 2019 and January 1, 2020.
b	How much revenue would be recognized in 2019?

Answer 1

The difference between sales value and note value ($20,000-$18,000)$2,000 is discount on notes receivable

Date	Account title	Debit	Credit	explanation
January 1 ,2019	Note receivable	$20,000		current assets
	Discount on note receivable		$2,000	difference to be recorded as dicount untill accrued
	Sales Revenue		$18,000	Income
January 1,2019	Cost of goods sold	$10,000		costof goods sold expense booked
	Inventory		$10,000	inventory reduced
December 31 ,2019	Discount on note receivable	$2,000
	Interest revenue		$2,000	interest accrued for year 2019
January 1 .2020	Cash	$20,000		note receivable matured cash received
	Notes receivable		$20,000

2. Total Revenue = sales revenue+interest revenue

=$18,000+$2,000

=$20,000

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