Drebin Security Systems sold merchandise to a customer in exchange for a $50,000

Question

Drebin Security Systems sold merchandise to a customer in exchange for a $50,000, five-year, noninterest-bearing note when an equivalent loan would carry 10% interest. Drebin would record sales revenue on the date of sale equal to: - Zero. - The future value of $50,000 using a 10% interest rate. - The present value of $50,000 using a 10% interest rate. - $50,000 - Zero. - The future value of $50,000 using a 10% interest rate. - The present value of $50,000 using a 10% interest rate. - $50,000 - Zero. - The future value of $50,000 using a 10% interest rate. - The present value of $50,000 using a 10% interest rate. - $50,000

Explanation / Answer

The present value of $50,000 using a 10% interest rate.

Reason- Current value of revenue = present value of expected cash flow in five years using 5% annula discounting = 50000/1.1^5

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