On December 31, 2020, Kargaran Company finished Online Marketing consultation services and

accepted in exchange a promissory note with a face value of $400,000, a due date of December 31,

2016, and a stated rate of 5%, with interest receivable at the end of each year. The fair value of the

services is not readily determinable and the note is not readily marketable. Under the circumstances, the

note is considered to have an appropriate imputed rate of interest of 10%.

The following interest factors are provided:

Interest Rate

Table Factors For Three Periods 5% 10%

Future Value of 1 1.15763 1.33100

Present Value of 1 .86384 .75132

Future Value of Ordinary Annuity of 1 3.15250 3.31000

Present Value of Ordinary Annuity of 1 2.72325 2.48685

Instructions

(a) Determine the present value of the note.(EXPLAIN / CALCULATION)

(b) Prepare a Schedule of Note Discount Amortization for Kargaran Consulting Company under the

effective-interest method. (Round to whole dollars.) (EXPLAIN AND CALCULATION)