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$9,500, and GM paid GMAC a retail rate support payment of $500
(retail rate support example).
a. GMAC
GMAC purchased the RISC from an independent GM dealer for
$10,000, and it recorded the following assets on its books:
Retail customer receivable 1$12,000
Rate support receivable 500
1 This figure included the $10,000 face value of the
RISC and $2,000 below-market interest stated in the
RISC.
GMAC credited the $10,000 it paid the independent GM dealer
for the RISC to its cash account and $2,500 to its unearned
income account. These items were recorded as follows:
Cash ($10,000)
Unearned income 1(2,500)
1 This figure equaled the face amount of the RISC plus
the below-market stated interest (i.e., the total
amount the retail customer was to pay GMAC over the
term of the RISC) minus the fair market value of the
RISC at the time of its purchase. Thus, the unearned
income account included the discount income and the
below-market stated interest that GMAC earned on the
RISC.
When GMAC received the $500 retail rate support payment from
GM, GMAC increased its cash by $500 and eliminated the rate
support receivable. The net effect on GMAC's balance sheet was
as follows:
Retail customer receivable $12,000
Cash (9,500)
Unearned income (2,500)
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