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Find what amount should be reported as interest income

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Reference no: EM132838199

On January 1, 2017, Xiaoxian Company sold an equipment with a carrying amount of $800,000, receiving a noninterest-bearing note due in three years with a face amount of $1,000,000. There is no established market value for the equipment.

  • The interest rate on similar obligations is 12%. The present value of 1 at 12% for three periods is .712.

Problem 1 What amount should be reported as gain or loss on the sale of equipment in 2017?

a. 200,000 gain

b. 200,000 loss

c. 88,000 gain

d. 88,000 loss

Problem 2 What amount should be reported as interest income for 2017?

a. 288,000

b. 120,000

c. 96,000

d. 85,440

Problem 3 What is the carrying amount of note receivable on December 31, 2017?

a. 559,600

b. 712,000

c. 797,440

d. 800,000

Problem 4 What amount should be reported as interest income for 2018?

a. 95,693

b. 96,000

c. 75,000

d. 60,000

Reference no: EM132838199

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