Exhibit 14-11 Hernandez, Ltd.issued a three-year, $100, 000, non-interest-bearing note to a customer on January 1, 2010.Hernandez also agrees to sell inventory to the customer at reduced rates over a five-year period.Hernandez's incremental interest rate is 10%, and the present value of the note is $75, 132.
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Refer to Exhibit 14-11.Hernandez's sales revenue connected with the note in 2010 is

Question

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The present value of the note is $75,132, which is the amount of sales revenue that Hernandez will recognize over the three-year period. The sales revenue for 2010 is 1/3 of the present value, or $25,044. However, the note is non-interest-bearing, so the sales revenue is reduced by the imputed interest of $20,060 (10% x $100,000 x 1 year). Therefore, the sales revenue connected with the note in 2010 is $4,974 ($25,044 - $20,060).