Six Company an equipment manufacturer sold equipment to A Co

Six Company, an equipment manufacturer, sold equipment to A Company in exchange for a $200,000 noninterest-bearing note due in five years. Comparable interest-bearing notes have an interest rate of 11% interest rate. What amount of sales revenue should Six Company recognize on the date of the sale?

$200,000

Solution

Answer is $ 118,690. Explanation: Amount of Non interest bearing Note: 200000 Period of note 5 years Market rate of interest 11% Present value factor for 5 years at 11% 0.59345 Present value of note 118690 Hence, sales to be recorded at $ 118690