97. On December 31, 2014, Fraser Co. sold cars to Center City for its transit system for $5,000,000. Center City is going to pay the amount in full in 5 years, on January 2, 2020. They are not going...

97. On December 31, 2014, Fraser Co. sold cars to Center City for its transit system for $5,000,000. Center City is going to pay the amount in full in 5 years, on January 2, 2020. They are not going to pay any interest during the 5 years or at the end. The current rate of interest on similar loans is 10%.


Required:


A) How much revenue would Fraser record for the sale on December 31, 2014?
B) What will be the amount and classification of the receivable on the December 31, 2014 balance sheet?
C) What will be the financing income from the sale over the time that the receivable is outstanding?
D) How much interest revenue will be recorded in 2015?
E) What will be the amount and classification of the receivable on the December 31, 2019 balance sheet?

98. Teed's Contracting Company bought a new excavator on January 1, 2013. The company paid $10,000 down and signed a note receivable for the balance. The note required four annual cash payments of $18,000; the market interest rate is 8 percent.


Required:


A) At what amount will the equipment be recorded on the balance sheet for 2013?
B) How much was the interest expense for 2013?
C) What is the total amount of interest Teed's will pay on the machine?

99. A) Explain how management can use the estimate for the allowance for uncollectibles to create a hidden reserve.
B) Why would management want to create a hidden reserve?
C) Why is it difficult for users to detect hidden reserves?