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Calculate discount rate to be applied in calculating cash

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Question

Blossom Inc. sold a unit of inventory to a buyer for $1,000 payable in one year. Blossom estimates that the interest rate for a similar financing arrangement would be 7%. The unit of inventory normally sells for $850.

Assuming that the company recognizes an interest component, calculate the discount rate to be applied in calculating the cash selling price of the unit of inventory. Blossom prepares financial statements in accordance with IFRS. (Round PV factor to 2 decimal places, e.g. 920.25.)

Reference no: EM132406453

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