Multiple Choice Question 126 On January 1 2014 Ball Co excha

Multiple Choice Question 126 On January 1, 2014, Ball Co. exchanged equipment for a $500,000 zero-interest-bearing note due on January 1, 2017. The prevailing rate of interest for a note of this type at January 1, 2014 was 10% m e present value of $1 at 10% for three periods s 0.75. What amount of rterest revenue thuld be nduded in Bart 2015 income statement? $37,500 O so O $41,250 $50,000

Solution

Present value of notes receivable = 500000*0.75= $375000 Interest recognized in 2014 = 375000*10% = $37500 Interest recognized in 2015 = (375000+37500)*10% = $41250 Option 3 is correct