At the Beginning of 2020, Graham Company Received a Three-Year

question 70

Multiple Choice

At the beginning of 2020, Graham Company received a three-year zero-interest-bearing $5,000 trade note. The market rate for equivalent notes was 10% at that time. Gannon reported this note as a $5,000 trade note receivable on its 2020 year-end statement of financial position and $5,000 as sales revenue for 2020. What effect did this accounting for the note have on Gannon's net earnings for 2020, 2021, 2022, and its retained earnings at the end of 2022, respectively?

• A) overstate, overstate, understate, zero
• B) overstate, understate, understate, understate
• C) overstate, overstate, overstate, overstate
• D) None of these answer choices are correct.