Frasquita acquired equipment from the manufacturer on 6/30/2018 and gave a noninterest-bearing note in exchange. Frasquita is obligated to pay $550,000 on 4/30/2019 to satisfy the obligation in full.
- If Frasquita accrued interest of $15,000 on the note in its 2018 year-end financial statements, what would the manufacturer record in its 2018 income statement for this transaction?

Question

Quizplus · Accepted Answer

$15,000 was interest for 6 months in 2018. The note lasts 10 months, so 10/6 × $15,000 = $25,000 is the total interest for 10 months; the rest ($525,000) is principal, which is the sales revenue for the manufacturer of the equipment.

Frasquita Acquired Equipment from the Manufacturer on 6/30/2018 and Gave