On 1/1/03 aa received a 10,000 note in exchange for equipment sold. (carrying amount = 9,000) The stated interest rate = 5%, market rate = 8%, maturity = 3 years. There was no established exchange prices for the equipment and the not has no ready market.

I want to know how the numbers - Discount & Gain on disposal are derived.

Dale Journal entries 10.000. FV 9,000 BV 1/ 1/03 Dr. Note Receivable Cr. P.P.E. Discount Gain on Disposal 771 lovo 229 500 5% of 20000 interest 12/31/03 Dr. Cash Discount Cr. Interest income 238 738 ly 500 12/31/04 Dr. Cash Discount Cr. Interest income 257 757 24 500 276) Dr. Cash Discount Cr. Interest income Dr. Cash Cr. Note Receivable 12/31/05 34 776 (1.000 | 1.000)