Question
In: Accounting
On December 31, 2020, Oakbrook Inc. rendered services to Beghun Corporation at an agreed price of...
On December 31, 2020, Oakbrook Inc. rendered services to Beghun Corporation at an agreed price of $102,049, accepting $40,000 down and agreeing to accept the balance in four equal installments of $20,000 receivable each December 31. An assumed interest rate of 11% is imputed.
1. Instructions: Complete the note amortization table.
|
Date |
Cash Received |
Interest Revenue |
Discount Amortization |
Discount Balance |
Carrying Value |
2. Instructions: Journalize the transactions for the note origination, interest recognition, and the note collection at maturity.
Solutions
Expert Solution
1.
| Date | Cash received | Interest | Discount | Discount | Carrying |
| Revenue | Amortized | Balance | Value | ||
| 12/31/2020 | $ 62,049 | ||||
| 12/31/2021 | $ 20,000 | $ 6,825 | $ 13,175 | $ 48,874 | $ 48,874 |
| ($62,049 * 11%) | ($20,000 - 6,825) | ($62,049 - $13,175) | |||
| 12/31/2022 | $ 20,000 | $ 5,376 | $ 14,624 | $ 34,251 | $ 34,251 |
| 12/31/2023 | $ 20,000 | $ 3,768 | $ 16,232 | $ 18,018 | $ 18,018 |
| 12/31/2024 | $ 20,000 | $ 1,982 | $ 18,018 | $ 0 | $ 0 |
Working:
| Present Value =PV(11%,4,-20000,0) | £62,048.91 |
2.
| Debit | Credit | ||
| 12/31/2021 | Cash | $ 40,000 | |
| Notes Receivable ($20,000 * 4) | $ 80,000 | ||
| Discount on Notes Receivable | $ 17,951 | ||
| Service Revenue | $ 102,049 | ||
| Cash | $ 20,000 | ||
| Notes Receivable | $ 20,000 | ||
| Discount on Notes Receivable ($62,049 * 11%) | $ 6,825 | ||
| Interest Revenue | $ 6,825 | ||
| 12/31/2022 | |||
| Cash | $ 20,000 | ||
| Notes Receivable | $ 20,000 | ||
| Discount on Notes Receivable | $ 5,376 | ||
| Interest Revenue | $ 5,376 | ||
| 12/31/2023 | |||
| Cash | $ 20,000 | ||
| Notes Receivable | $ 20,000 | ||
| Discount on Notes Receivable | $ 3,768 | ||
| nterest Revenue | $ 3,768 | ||
| 12/31/2024 | |||
| Cash | $ 20,000 | ||
| Notes Receivable | $ 20,000 | ||
| Discount on Notes Receivable | $ 1,982 | ||
| Interest Revenue | $ 1,982 |
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