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chpt 7 hw sol - Chapter 7 Homework Solutions Exercise 7-10...

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Chapter 7 Homework Solutions Exercise 7-10 Requirement 1 June 30, 2006 Note receivable ........................................................... 30,000 .............................................................. Sales revenue ......................................................................... 30,000 December 31, 2006 Interest receivable ....................................................... 900 ............................................. Interest revenue ($30,000 x 6% x 6 / 12 ) ...................................................................................................................... 900 March 31, 2007 Cash [$30,000 + ($30,000 x 6% x 9 / 12 )] ............................ 31,350 ............................................. Interest revenue ($30,000 x 6% x 3 / 12 ) ...................................................................................................................... 450 ................... Interest receivable (accrued at December 31) .............................................................................. 900 .......................................................... Note receivable ......................................................................... 30,000 Requirement 2 2006 income before income taxes would be understated by $900 2007 income before income taxes would be overstated by $900.
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Exercise 7-11 Requirement 1 June 30, 2006 Note receivable (face amount) ....................................... 30,000 .......................... Discount on note receivable ($30,000 x 8% x 9 / 12 ) .................................................................................... 1,800 ............................................. Sales revenue (difference) ......................................................................... 28,200 December 31, 2006 Discount on note receivable ...................................... 1,200 ............................................. Interest revenue ($30,000 x 8% x 6 / 12 ) .................................................................................... 1,200 March 31, 2007 Discount on note receivable ...................................... 600 ............................................. Interest revenue ($30,000 x 8% x 3 / 12 ) .................................................................................... 600 Cash ........................................................................... 30,000 ....................................... Note receivable (face amount) ......................................................................... 30,000 Requirement 2 $ 1,800 interest for 9 months ÷ $28,200 sales price = 6.38% rate for 9 months x 12 / 9 to annualize the rate _______ = 8.51% effective interest rate
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Exercise 7-17 Step 1: Accrue interest earned.
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