Chen Inc accepted a twoyear noninterestbearing note for 6050

Chen Inc. accepted a two-year noninterest-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? A. Note receivable 605,000 Accounts receivable 605,000 B. Note receivable 500,000 Accounts receivable 500,000 C. Note receivable 605,000 Discount on note receivable 105,000 Sales revenue 500,000 D. Note receivable 605,000 Interest revenue 105,000 Cost of sales 500,000

Solution

Answer :

c. Note receivable 605,000

Discount on note receivable 105,000

Sales revenue 500,000