Question
On January 1, 2014, Crown Company sold property to Leary Company. There was no established exchange price for the property, and Leary gave Crown a
On January 1, 2014, Crown Company sold property to Leary Company. There was no established exchange price for the property, and Leary gave Crown a $4,000,000 zero-interest-bearing note payable in 5 equal annual installments of $800,000, with the first payment due December 31, 2014. The present value of the note at January 1, 2014 discounted at the prevailing market rate is $2,884,000. What should be the balance of the Discount on Notes Payable account on the books of Leary at December 31, 2014 after adjusting entries are made, assuming that the effective-interest method is used?
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