Selkirk Inc.sold a $500,000 machine to Gimly Company.The terms of the sale are that the full amount is due in 2 years plus interest payable annually at 6%.What amount would be recorded as revenue on the day the sale is made?

Question

Quizplus · Accepted Answer

The revenue should be recorded at the present value of the future cash flows. The present value of $500,000 due in 2 years at a 6% annual interest rate is $500,000 / (1.06)^2 = $444,998.