Exhibit 13-03
On January 1, 2017, Train, Inc. accepted an $80,000, non-interest bearing 3 year note in exchange for equipment it sold to Steam Company. Train originally purchased the equipment for $125,000, and it had a book value of $75,000 on the date of the sale. The note was non-interest-bearing. An assumed 11% interest rate is implicit in the agreement. Actual information for 11%, three periods, follows:
-Refer to Exhibit 13-03. What amount would Train record as interest income on December 31, 2017?

Question

Exhibit 13-03
On January 1, 2017, Train, Inc. accepted an $80,000, non-interest bearing 3 year note in exchange for equipment it sold to Steam Company. Train originally purchased the equipment for $125,000, and it had a book value of $75,000 on the date of the sale. The note was non-interest-bearing. An assumed 11% interest rate is implicit in the agreement. Actual information for 11%, three periods, follows: 
-Refer to Exhibit 13-03. What amount would Train record as interest income on December 31, 2017?

Quizplus · Accepted Answer

The interest income is calculated based on the interest rate and the principal amount for the period up to December 31, 2017. The correct amount is $6,434.

Exhibit 13-03 On January 1, 2017, Train, Inc. Accepted an $80,000, Non-Interest