On January 1, 2020, Billy Company sold equipment that originally cost $5,000,000 to Selecta Company. As payment, Selecta gave Crawford a $7,000,000 note. The note bears an interest rate of 4% and is to be repaid in three annual installments plus interest on the outstanding balance. The first payment is due on December 31, 2020. The market price of the land is not readily determinable. The prevailing rate of interest for notes of this type is 8%. What Amount of Interest income, if any, should be included in Billy's 2020 income statement?
On January 1, 2020, Billy Company sold equipment that originally cost $5,000,000 to Selecta Company. As payment, Selecta gave Crawford a $7,000,000 note. The note bears an interest rate of 4% and is to be repaid in three annual installments plus interest on the outstanding balance. The first payment is due on December 31, 2020. The market price of the land is not readily determinable. The prevailing rate of interest for notes of this type is 8%. What Amount of Interest income, if any, should be included in Billy's 2020 income statement?
Chapter5: Introduction To Business Expenses
Section: Chapter Questions
Problem 61P
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On January 1, 2020, Billy Company sold equipment that originally cost $5,000,000 to Selecta Company. As payment, Selecta gave Crawford a $7,000,000 note. The note bears an interest rate of 4% and is to be repaid in three annual installments plus interest on the outstanding balance. The first payment is due on December 31, 2020. The market price of the land is not readily determinable. The prevailing rate of interest for notes of this type is 8%.
What Amount of Interest income, if any, should be included in Billy's 2020 income statement?
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