Explanation:
To calculate the sales revenue Wright would recognize on January 1, 2024, we need to determine the present value of the note receivable using the effective interest rate of 5%.
We can use the present value of a single sum formula:
\[ PV = \frac{FV}{(1 + r)^n} \]
Where:
- \( PV \) = Present value
- \( FV \) = Future value (amount due on December 31, 2026)
- \( r \) = Effective interest rate (5% or 0.05)
- \( n \) = Number of periods (number of years from January 1, 2024, to December 31, 2026)
Given:
- \( FV = \$528,000 \)
- \( r = 0.05 \)
- \( n = 3 \) years (from 2024 to 2026)
Now, let's calculate the present value:
\[ PV = \frac{528,000}{(1 + 0.05)^3} \]
\[ PV \approx \frac{528,000}{(1.05)^3} \]
\[ PV \approx \frac{528,000}{1.157625} \]
\[ PV \approx 456,514.17 \]
Rounding to the nearest whole number, the sales revenue Wright would recognize on January 1, 2024, for this transaction is approximately \$456,514.
