On January 1, 2020, Jim Beam Company sold goods to a customer and received an installment note...

Question:

On January 1, 2020, Jim Beam Company sold goods to a customer and received an installment note requiring payments of $15,000 annually for six years. The first payment was received by Jim Beam Company on January 1, 2020. The prevailing rate of interest for this type of note is 8%. The total sales revenue Jim Beam Company would record for this sale on January 1, 2020 is:

A) $90,000

B) $69,343

C) $74,891

D) $15,000

Sales Revenue:

The sales revenue is the income received by selling the products or services or whatever the company is dealing with. The revenue is cash inflow without any deduction pf cost.

Answer and Explanation:

Total sales revenue = Current value of all installments

So we will calculate the present value of all installments

The formula to calculate the same= = Annual installment * PVA due factor (8%, 6)

= $15,000 * 4.99

= $74,891

Hence, the sales revenue to be recorded is $74,891


Learn more about this topic:

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How to Calculate Sales Revenue: Definition & Formula

from Financial Accounting: Help and Review

Chapter 5 / Lesson 27
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