omputes the present value of the two cash flows as t Face value of the note Pres

Question

omputes the present value of the two cash flows as t Face value of the note Present value of the $10,000 quarterly iX2. The note hcron and takes a 2 year non-interest bearing note sale. Comparable notes have a stated interest rate of 12% The equipment originally cost Omega $280,000 and has ac $110,000. Example: Non-InterestBearingNoteReceivable #3 January 1, 20X2. The note has a face value of $120, quarterly installments, with the first installment due one quarter from the date of compounded compounded quarterly Record the entry for the sale on Omega's books.

Explanation / Answer

Solution: i = 12%/4 = 3% ; n = 2*4 = 8 ; PMT = (120000/2)/4 = 15000

PV = 15000*PVOA(3%,8) = 15000*7.01969 = $105,295

loss on sale = 110,000 - 105,295 = $4,705

particulars Debit($) Credit($) Note Receivable 120,000 Accumulated Depreciation(280000-110000) 170,000 Loss on sale 4,705 Discount on Note Receivable 14,705 Equipment 280,000

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