Question
As discussed in class, business transactions often involve the exchange of cash, property, goods or services for a note receivable. Read the section on recognition
As discussed in class, business transactions often involve the exchange of cash, property, goods or services for a note receivable. Read the section on recognition and describe how the amount of interest is determined in the following cases:
when the entity receives a note and provides cash to the borrower.
when the entity receives a note and provides property, goods or services to the buyer.
when the entity receives a note but must determine an imputed interest rate.
2. Read pages 338-341 of your textbook to complete the following table, to determine the present value of a 5,000, 6%, 5-year notes receivable, with annual interest payments made at the end of each year. The table requires the present value of one notes receivable, but with 3 possible market interest rates as shown on the table.
Possible market interest rate | 4% | 6% | 8% |
Present value of repayment of the face amount of the note receivable at the end of 5 years. |
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Present value of the annual interest payments * |
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Total present value of the note |
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* in order to measure the present value of the annual interest payments, be sure to appropriately measure the dollar amount of the interest payments and then measure the present value.
help asap please!
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