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Calculate the imputed interest rate

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Question - The Tata company is an enterprise that sold some merchandise for $160,000 on January 1, 2020. The customer paid $20,000 in cash and issued a note for the remainder. The principal will be due in 2 years, and a 5% interest is due every December 31st.

The customer's borrowing rate is 7%.

Required -

a) Assuming Electronic Corp. chose to use the straight-line method to account for interest revenue, prepare all the journal entries related to this sale.

b) Assume now that Electronic Corp. is a public company. Prepare all journal entries related to this sale.

c) Assume that the customer's borrowing rate is unknown and that the merchandise cash price is $150,000 (everything else holds true). Calculate the imputed interest rate and the interest revenue to be recorded on December 31, 2020 under IFRS.

Reference no: EM132980937

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