Tarheel Services Is Holding a Note Receivable from One of Its

question 66

Essay

Tarheel Services is holding a note receivable from one of its customers and wishes to collect the cash earlier than the maturity date of the note.The note is for $1,000 and carries a rate of 4%.Tarheel sells the note to a bank for $1,080.Please provide the journal entry with Tarheel makes to record this transaction.
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Definitions:

Tax Shield

The reduction in income taxes that results from taking allowable deductions from taxable income, such as interest on debt.

Fully Taxable Recapture

The process whereby the IRS fully taxes the depreciation or deductions previously taken on an asset, typically when the asset is sold for a gain.

Bargain Price

A price that is significantly lower than the perceived value of an item or investment.

Balance Sheet

A financial statement that showcases the assets, liabilities, and shareholders' equity of a company at a specific point in time.