Trader Trust Accepts a $500,000 Non-Interest Bearing 10-Year Note from Coffee

question 170

Multiple Choice

Trader Trust accepts a $500,000 non-interest bearing 10-year note from Coffee Co.in exchange for Cash on 1/1/16.Coffee Co.promises to repay $500,000 at maturity.The market rate on 1/1/16 was 4%.How much Interest Revenue will Trader Trust record on this note in 2016?

• A)$0,this is a non-interest bearing note receivable.
• B)$13,511
• C)$20,000
• D)$13,652

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Definitions:

Net Realizable Value

The estimated selling price of goods, minus the costs of their completion and costs necessary to make the sale.

Market Value

Market value is the current price at which an asset or service can be bought or sold in a marketplace.

Ending Inventory

The total value of all merchandise or goods held by a company at the end of an accounting period, which has not been sold.

Allowance Method

An accounting technique used to account for bad debts, where companies estimate uncollectible accounts receivable and record them as an allowance for doubtful accounts.