1. **Problem Statement:** Wright Transport sold buses and received a note payable of 530000 due in 3 years with an 8% effective interest rate. We need to find the sales revenue recognized on January 1, 2024, which is the present value (PV) of the note. 2. **Formula and Explanation:** The present value of a single future amount is calculated using the formula: $$PV = \frac{FV}{(1 + r)^n}$$ where $FV$ is the future value, $r$ is the interest rate, and $n$ is the number of periods. 3. **Calculation:** Here, $FV = 530000$, $r = 0.08$, and $n = 3$. $$PV = \frac{530000}{(1 + 0.08)^3} = \frac{530000}{1.259712} \approx 420523.44$$ 4. **Interpretation:** Wright Transport recognizes sales revenue of approximately 420523.44 on January 1, 2024. 5. **Journal Entries:** - On January 1, 2024 (sale of merchandise): - Debit Notes Receivable 420523.44 - Credit Sales Revenue 420523.44 - On December 31, 2024 (interest accrual): - Interest = $420523.44 \times 0.08 = 33641.88$ - Debit Interest Receivable 33641.88 - Credit Interest Revenue 33641.88 - On December 31, 2025 (interest accrual): - New principal = $420523.44 + 33641.88 = 454165.32$ - Interest = $454165.32 \times 0.08 = 36333.23$ - Debit Interest Receivable 36333.23 - Credit Interest Revenue 36333.23 - On December 31, 2026 (receipt of payment): - Principal + interest accrued = $454165.32 + 36333.23 + (interest on 2026 principal)$ - Interest on 2026 principal = $(454165.32 + 36333.23) \times 0.08 = 39339.16$ - Total payment = $530000$ - Debit Cash 530000 - Credit Notes Receivable 420523.44 - Credit Interest Receivable (33641.88 + 36333.23) = 69975.11 - Credit Interest Revenue 39339.16 This completes the recognition and accounting for the note and interest.