On January 1, 2021, Wright Transport sold four school buses to the Elmira School District. In exchange for the buses, Wright received a note requiring payment of $534,000 by Elmira on December 31, 2023. The effective interest rate is 6%. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) (Use appropriate factor(s) from the tables provided.):1. How much sales revenue would Wright recognize on January 1, 2020, for this transaction?2. Prepare journal entries to record the sale of merchandise on January 1, 2020 (omit any entry that might be required for the cost of the goods sold), the December 31, 2020, interest accrual, the December 31, 2021, interest accrual, and receipt of payment of the note on December 31, 2022Required 1: How much sales revenue would Wright recognize on January 1, 2018, for this transaction? (Round your final answer to nearest whole number.)
ales revenue
Required 2: - Record the sale of goods on January 1, 2018 in exchange for the long term note.
- Record the interest accrual on December 31, 2018.
- Record the interest accrual on December 31, 2019.
- Record the interest revenue in 2020 and collection of the note..

Solution:

1. (i)  

Sales revenue = Present value of the note receivable  

= $528,000 x .86384 = $456,108  

Present value of $1: n = 3, i = 5% (PV of $1)  

(ii)  

December 31, 2018:  

Interest revenue: ($456,108 x 5%) = $22,805  

December 31, 2019:  

Interest revenue: (($456,108 + $22,805) x 5%) = $23,946  

December 31, 2020:  

Interest revenue: (($456,108 + $22,805 + $23,946) x 5%) = $25,143  

2. Journal entries to record the sale of merchandise on January 1, 2020

Date                  General Journal                                    Debit        Credit.

Jan 01, 2018     Note receivable                                 528,000

                    Discount on note receivable                                       71,892

                       Sales revenue                                                           456,108

Dec 31' 2018      Discount on note receivable            22,805

                            Interest revenue                                                   22,805

Dec 31, 2019      Discount on note receivable              23,946

                           Interest revenue                                                     23,946

Dec 31' 2020              Cash                                          528,000

                          Discount on note receivable                                  25,143

                         Interest revenue                                                       25,143

                         Note receivable                                                     528,000