CA7-8 (Accounting for Zero-Interest-Bearing Note) Soon after beginning the year-end audit work on March 10 at Engone Company, the auditor has the following conversation with the controller. Controller: The year ended March 31st should be our most profitable in history and, as a consequence, the board of directors has just awarded the officers generous bonuses. Auditor: I thought profits were down this year in the industry, according to your latest interim report. Controller: Well, they were down, but 10 days ago we closed a deal that will give us a substantial in- crease for the year. Auditor: Oh, what was it? Controller: Well, you remember a few years ago our former president bought stock in Henderson En- terprises because he had those grandiose ideas about becoming a conglomerate. For 6 years we have not been able to sell this stock, which cost us $3,000,000 and has not paid a nickel in dividends. Thursday we sold this stock to Bimini Inc. for $4,000,000. So, we will have a gain of $700,000 ($1,000,000 pretax) which will increase our net income for the year to $4,000,000, compared with last year