Items 1 and 2 are based on the following:
On January 2, 2006, Emme Co. sold equipment with a carrying amount of $480,000 in exchange for a $600,000 noninterest-bearing note due January 2, 2009. There was no established exchange price for the equipment. The prevailing rate of interest for a note of this type at January 2, 2006, was 10%. The present value of $1 at 10% for three periods is 0.75.
In Emme’s 2006 income statement, what amount should be reported as interest income?
- $ 9,000
- $45,000
- $50,000
- $60,000
In Emme’s 2006 income statement, what amount should be reported as gain (loss) on sale of machinery?
- $(30,000) loss.
- $ 30,000 gain.
- $120,000 gain.
- $270,000 gain.