Exercise 7-19 (Part Level Submission) On December 31, 2012, Ed Abbey Co. perform
ID: 2416546 • Letter: E
Question
Exercise 7-19 (Part Level Submission)
On December 31, 2012, Ed Abbey Co. performed environmental consulting services for Hayduke Co. Hayduke was short of cash, and Abbey Co. agreed to accept a $266,000 zero-interest-bearing note due December 31, 2014, as payment in full. Hayduke is somewhat of a credit risk and typically borrows funds at a rate of 12%. Abbey is much more creditworthy and has various lines of credit at 6%.
(a)
Date
Account Titles and Explanation
Debit
Credit
Open Show Work
SHOW LIST OF ACCOUNTS
SHOW SOLUTION
SHOW ANSWER
LINK TO TEXT
(b)
Date
Account Titles and Explanation
Debit
Credit
Exercise 7-19 (Part Level Submission)
On December 31, 2012, Ed Abbey Co. performed environmental consulting services for Hayduke Co. Hayduke was short of cash, and Abbey Co. agreed to accept a $266,000 zero-interest-bearing note due December 31, 2014, as payment in full. Hayduke is somewhat of a credit risk and typically borrows funds at a rate of 12%. Abbey is much more creditworthy and has various lines of credit at 6%.
Explanation / Answer
a) Notes receivable $266,000
Service revenue $212,055 (266,000 * pv .7972 for 12% 2 years )
Discount on notes receivable $53,945 (266,000- 212,055)
b) Discount on notes receivable $25,446.6 ($212,055(service revenue) *.12)
Interest Revenue $25,446.6
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