Drebin Security Systems sold merchandise to a customer in exchange for a $50,000, 5-year, noninterest-bearing note when an equivalent loan would carry 10% interest. Drebin would record sales revenue on the date of sale equal to:

Question

Quizplus · Accepted Answer

The company should record the present value of the note as revenue on the date of sale, which is the amount the company expects to receive in the future, discounted by the appropriate interest rate. Therefore, the present value of $50,000 using a 10% interest rate would be recorded as sales revenue.

Drebin Security Systems Sold Merchandise to a Customer in Exchange