Question

On January 1, 2020, Concord Corporation exchanged equipment for an $782000 zero-interest-bearing note due on January 1, 2023. The prevailing rate of interest for a note of this type at January 1, 2020 was 9%. The present value of $1 at 9% for three periods is 0.77. What amount of interest revenue should be included in Concord's 2021 income statement?

Answer 1

The amount of interest revenue should be included in Concord's 2021 income statement is $59069.934

Step-by-step explanation:

Carrying value of note on january 1, 2020 = $782000*0.77

= $602140

Interest for 2020 = $602140*9%

= $54192.6

Interest for 2021 = ($602140 + $54192.6)*9%

= $59069.934

Therefore, The amount of interest revenue should be included in Concord's 2021 income statement is $59069.934