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20 June, 04:39

Chen inc. accepted a two-year non interest-bearing note for $605,000 on january 1, 2016. the note was accepted as payment for merchandise with a fair value of $500,000. the effective interest rate is 10%. what is the correct entry to record the note

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  1. 20 June, 07:53
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    This would be the journal entry to record the transaction for the non-interest bearing note:

    January 1, 2016

    Debit Notes Receivable 605,000

    Credit Discount on notes receivable (605,000 - 500,000) 105,000

    Credit Sales Revenue 500,000

    As for the interest at the end of the month

    Debit Discount on notes receivable 2,520.83

    Credit Interest Revenue 2,520.83

    Computation: 605,000 x. 10 divided by 24 since it is 2 years
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