Frankenstein Enterprises Received Two Notes from Customers for Sales That

question 89

Multiple Choice

Frankenstein Enterprises received two notes from customers for sales that Frankenstein made in 2018. The notes included:
Note A: Dated 5/31/2018, principal of $120,000 and interest due 3/31/2019.
Note B: Dated 7/1/2018, principal of $200,000 and interest at 8% annually, due on 4/1/2019.
Frankenstein had accrued a total of $14,400 interest receivable from these notes in its 12/31/2018 balance sheet.
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Assume Frankenstein views the financing component of these sales to be significant. What amount of interest revenue would Frankenstein earn on these notes during 2019?

• A) Above $12,000.
• B) Between $7,000 and 10,000.
• C) Less than $5,000.
• D) None of these answer choices are correct.

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Definitions:

Investment

The action of dedicating financial resources in expectation of gaining profits or income.

Discounted Payback Period

The time it takes to recoup an investment considering the time value of money, by discounting future cash flows to present value.

Market Value

The immediate cost at which services or assets are exchangeable in a free trading market.

Net Present Value

A financial metric that discounts all expected future cash flows to their present value to assess the viability or profitability of an investment.