Montana Minerals sold coal to Beta Electric, receiving a six-month, noninterest-bearing note for $200,000. The fair value of the goods sold to Beta is $192,000. Montana uses a periodic inventory system, and views the financing component of this transaction to be significant.Required:1. Prepare the journal entry to record the sale.2. Compute the effective annual rate of interest.
What will be an ideal response?
| 1. | Notes receivable | 200,000 |
| Discount on notes receivable | 8,000 |
| Sales revenue | 192,000 |
| 2. | Effective interest = $8,000/$192,000 × 2 = 8.33% |
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