Sale of Land on Noninterest Bearing Note Farmland Corporation sold 80 acres of land to Bigtime Developers, January 1, 2000, on a noninterest-bearing note with a maturity date of December 31, 2006, and a maturity amount of $1,000,000. A 9 percent return in the form of interest is considered appropriate on the loan. The present value of the

$1,000,000 payment at January 1, 2000, was $547,030. On December 31, 2000, Farmland recorded interest income as follows:

a. At what amount should Farmland record the sale of land on January 1, 2000?

b. What amount of discount on notes receivable would Bigtime record on January 1, 2000?

c. Is the interest income recorded by Farmland Corporation at December 31, 2000, correct? If not, what amount should have been recorded?

d. What amount of interest income should Farmland record at December 31, 2001?

Transcribed Image Text:

Interest Receivable 90,000 Interest Income 90,000