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b. as earing or non-int est-bearing, long-term bonds and notes (both notes hereinafter) are initially recorded at the present value of the cash payments required

b. as earing or non-int est-bearing, long-term bonds and notes (both notes hereinafter) are initially recorded at the present value of the cash payments required to be made under the terms of the note. Whenever a note is issued solely for cash, its present value is the amount of cash received and the effective interest rate can be computed as we have done previously. Example: Kent Company purchased land on December 31, 20X1 in exchange for a two-year non- interest-bearing note having a face amount of $10,000 due on December 31, 20X3. The seller's cost of the land was $9,000. Assume that the fair value of the land is not readily determinable. Assume also that prevailing conditions are such that an imputed interest rate of 10% is appropriate in this situation. a. 12/31/X1 12/31/X2 PV = of asmenoxe nxUS indi What is the initial present value of the note? 10,000 12/31/X3

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