Cypress Oil Company's December 31, 2024, balance sheet listed $905,000 of notes receivable and $22,400 of interest receivableincluded in current assets. The following notes make up the notes receivable balance:Note 1 Dated 8/31/2024, principal of $450,000 and interest at 8% due on 2/28/2025.Note 2 Dated 6/30/2024, principal of $260,000 and interest due 3/31/2025.Note 3 $200,000 face value noninterest-bearing note dated 9/30/2024, due 3/31/2025. Note was issued in exchange for merchandise.The company records adjusting entries only at year-end. There were no other notes receivable outstanding during 2024.Required:1. Determine the rate used to discount the noninterest-bearing note.2. Determine the explicit interest rate on Note 2.3. What is the amount of interest revenue that appears in the company's 2024 income statement related to these notes?Answer is complete but not entirely correct.1. Discount rate10%2. Interest rate80%3. Interest revenue$53,696

Notes receivable is a balance sheet item shown on the asset side. Notes receivable is a promissory…

1. Determine the rate used to discount the noninterest-bearing note. 2. Determine the explicit interest rate on Note 2. 3. What is the amount of interest revenue that appears in the company's 2024 income statement related to these notes?

1. Determine the rate used to discount the noninterest-bearing note. 2. Determine the explicit interest rate on Note 2. 3. What is the amount of interest revenue that appears in the company's 2024 income statement related to these notes?

Principles of Accounting Volume 1

19th Edition

ISBN:9781947172685

Author:OpenStax

Publisher:OpenStax

Chapter9: Accounting For Receivables

Section: Chapter Questions

Problem 22MC: A company collects an honored note with a maturity date of 24 months from establishment, a 10%...

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Question

Cypress Oil Company's December 31, 2024, balance sheet listed $905,000 of notes receivable and $22,400 of interest receivable
included in current assets. The following notes make up the notes receivable balance:
Note 1 Dated 8/31/2024, principal of $450,000 and interest at 8% due on 2/28/2025.
Note 2 Dated 6/30/2024, principal of $260,000 and interest due 3/31/2025.
Note 3 $200,000 face value noninterest-bearing note dated 9/30/2024, due 3/31/2025. Note was issued in exchange for merchandise.
The company records adjusting entries only at year-end. There were no other notes receivable outstanding during 2024.
Required:
1. Determine the rate used to discount the noninterest-bearing note.
2. Determine the explicit interest rate on Note 2.
3. What is the amount of interest revenue that appears in the company's 2024 income statement related to these notes?
Answer is complete but not entirely correct.
1. Discount rate
10
%
2. Interest rate
80
%
3. Interest revenue
$
53,696

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